THE  OTHER  SIDE 


A  BRIEF  ACCOUNT  OF  THE  DEVELOPMENT  OF 
INDUSTRIAL  ORGANIZATIONS  IN  THE  UNITED 
STATES  AND  A  STUDY  OF  THE  ADVANTAGES 
THAT  CAPITAL,  LABOR  AND  THE  CONSUMING 
PUBLIC  DERIVE  FROM  THEM 


BY 

LYMAN   HORACE  WEEKS 


NATIONAL  PUBLISHING  COMPANY 

SAINT  PAUL   BUILDING 

NEW  YORK 


Copyright,  1900,  by 

NATIONAL  PUBLISHING  COMPANY 

NEW  YORK 


PREFACE 

Ten  years  ago  a  large  majority,  even  of  intelligent 
people,  regarded  with  undisguised  apprehension  the 
growing  tendency  of  capital  to  combine  in  large  corpo- 
rations. All  trusts  were  declared  to  be  monopolies  that 
threatened  the  industrial  freedom  of  the  masses,  the 
economical  living  of  the  community  and  the  stability  of 
republican  institutions. 

Nothing  but  evil  could  be  discerned  in  these  new 
forms  of  capitalistic  enterprise.  They  were  vigorously 
denounced  on  every  hand.  Pulpit  and  platform,  news- 
paper and  magazine  vied  with  each  other  in  condemn- 
ing "the  octopus,"  as  the  trust  came  to  be  termed. 
That  speaker  or  that  writer  could  be  most  sure  of  win- 
ning the  public  applause  who  could  most  forcibly 
inveigh  against  trusts  and  monopolies  and  the  evils 
that  were  predicted  of  them.  Scarcely  a  good  word 
was  anywhere  said  for  the  trust.  Only  here  and  there 
was  a  voice  raised  in  its  defense,  and  most  often  was 
that  the  voice  of  some  paid  advocate. 

In  less  than  ten  years  the  attitude  of  the  public  in  this 
matter  has  undergone  a  very  substantial  change.  As 
the  end-of-the-century  industrial  movement  has  been 
calmly  studied  it  has  gradually  received  fair  recogni- 
tion as  an  economic  force  of  undoubted  vitality  and 
value;  as  something  to  be  reckoned  with  intelligently 
and  hopefully.  The  day  of  its  denunciation  has  passed. 


1383777 


6  PREFACE 

Wholesale  abuse  is  now  bestowed  upon  it  only  by  dem- 
agogues for  political  effect,  or  by  a  few  superficial 
thinkers  and  speakers. 

The  most  strenuous  anti-trust  advocates  no  longer 
demand  that  the  trust  shall  be  destroyed.  That  line  of 
argument  has  been  altogether  abandoned.  Instead,  it 
is  argued  that  these  great  aggregations  of  capital  need 
only  to  be  controlled  in  some  way  to  the  profit  alike  of 
their  share  owners  and  the  general  public.  The  sig- 
nificant and  astonishing  thing  in  connection  with  the 
Chicago  Conference  on  Trusts  in  September,  1899,  was 
the  manifestation  of  this  change  in  public  opinion. 
Men  from  all  walks  of  life,  statesmen,  politicians,  pub- 
licists, doctrinaires,  professors,  lawyers,  business  man- 
agers, millionaires  and  workingmen  appeared  on  that 
platform  in  substantial  accord.  Only  a  small  minority 
were  there  to  unreservedly  condemn. 

In  the  following  pages  the  situation  is  presented  as  it 
now  stands  in  the  light  of  the  best  thought  of  the  day. 
The  volume  is  not  an  argument,  nor  a  brief.  It  simply 
sets  forth  the  theories  and  plain  facts  now  generally 
accepted  regarding  these  combinations  of  capital  and 
the  economic  questions  arising  from  them.  It  dis- 
cusses the  rise  and  development  of  the  trust  idea  out  of 
natural  conditions  that  insure  its  permanence  and  its 
value  as  a  factor  in  industrial  progress,  and  aims  to 
bring  into  stronger  light  the  advantages  that  accrue  to 
the  public,  the  workingman  and  the  investor  from  this 
readjustment  of  capital. 


PREFACE  7 

That  the  volume  may  contribute  to  a  better  under- 
standing of  this  all-absorbing  problem  is  the  earnest 
hope  of  the  author.  Its  purpose  will  be  fully  accom- 
plished if  it  shall  succeed  in  showing  that  the  discus- 
sion of  the  question  belongs  to  the  domain  of  rational 
philosophical  consideration,  and  not  to  the  field  of  acri- 
monious, prejudiced  dispute. 

LYMAN  HORACE  WEEKS. 


CONTENTS 

CHAPTER  PAGE 

I  An  Economic   Evolution n 

II  Amalgamation  of  Corporations 31 

III  Administration  and  Production     ....  43 

IV  Competition  Not  Destroyed 67 

V  Capitalization  and  Ownership 81 

VI  Foreign  Markets  and  the  Tariff   .     .     ....  97 

VII  Capital  and  Labor 113 

VIII  Recognition  of  Organized  Labor     ....  127 

IX  Supervision  and  Regulation 143 

X  Anti-Trust  Legislation  Futile 161 

XI  Notable  Individual  Opinions 199 


AN  ECONOMIC  EVOLUTION 

COMBINATIONS  OF  SEGREGATED  CAPITAL  INTO  LARGE  SINGLE 
CORPORATIONS  A  NOTABLE  RESULT  OF  THE  NINETEENTH 
CENTURY  TENDENCY  TOWARD  CENTRALIZATION  AS  EXHIB- 
ITED IN  ALL  FORMS  OF  HUMAN  ACTIVITY 

An  industrial  and    commercial    revolution 
An  Era  of  jias  ma(je  notable  the  closing  years  of  the 

nineteenth  century.  Under  the  influence  of 
steam,  electricity  and  machinery,  and  in  response  to  the 
demands  of  a  progressive  and  exacting  civilization  this 
has  become  an  era  of  combinations  in  the  field  of  capi- 
tal as  well  as  in  that  of  labor. 

Everything,  in  every  department  of  human  endeavor, 
is  now  done  on  a  large  scale.  Centralization  has  long 
been  an  accomplished  fact  in  national  and  social  life. 
Witness  the  establishment  of  the  American  colonies  into 
the  Republic  of  the  United  States,  and  the  unification 
of  the  German  and  Italian  kingdoms  and  principalities 
into  two  great  nations.  Observe  how  population  has 
steadily  drifted  away  from  the  segregated  existence  of 
the  country  to  the  upbuilding  of  cities.  Finally  the 
same  influence  has  laid  hold  upon  business.  Capital 
has  concentrated.  In  place  of  the  hundreds  of  small 
business  concerns  and  corporations,  we  have  the  big 
aggregations  of  capital,  employing  armies  of  helpers, 
and  ministering  to  the  needs,  not  of  small  and  widely 
separated  localities,  but  to  States  and  nations. 


12  THE    OTHER    SIDE 

The  phenomenon  is  world-wide  wherever 
mB±ess  *  modern  industry  has  succeeded  in  establish- 
Methods  jng  a  foothold.  In  Great  Britain,  in  France, 

and  in  Germany,  the  leading  manufacturing  countries 
of  Europe,  it  is  only  less  conspicuous  than  in  the 
United  States.  Nothing  like  it  has  ever  been  known. 
It  is  more  than  a  mere  casual  happening  of  the  moment 
or  an  uncertain  experiment.  In  extent  and  in  power 
and  in  far-reaching  possibilities,  it  exceeds  in  impor- 
tance any  and  every  movement  that  has  heretofore 
marked  the  progress  of  the  industrial  world.  It  is  the 
passing  of  the  old  ways  and  the  beginning  of  a  new 
era.  Just  as  the  invention  of  machinery  revolutionized 
all  crafts,  so  the  new  methods  of  utilizing  capital  will 
revolutionize  production  and  distribution  and  start  the 
world  anew  upon  a  more  wonderful  industrial  career 
than  it  has  ever  before  enjoyed. 

...       ,         In  the  United  States  particularly,  this  cen- 
Vita!  Importance 
of  the  Trust        tralization  of  capital  has  assumed  gigantic 

Problem  proportions.    For  nearly  a  quarter  of  a  cen- 

tury the  process  has  been  gradually  going  on,  and  in 
the  last  ten  years  it  has  advanced  with  an  irresistible 
force  that  has  astounded  everybody,  even  those 
engaged  in  it,  and  excited  the  fears  of  the  timid.  The 
illimitable  resources  of  this  country,  its  manufacturing 
supremacy,  and  the  surpassing  energy  and  enterprise 
of  the  American  people,  whether  capitalists  or  laborers, 
have  made  this  the  most  inviting  and  the  most  satisfy- 
ing field  for  the  exploitation  of  these  marvelous  end-of- 
the-century  business  enterprises. 

The  trust  problem,  as  it  is  called,  now  challenges  the 
attention  of  the  entire  country.  It  is  one  of  the  fore- 
most topics  of  discussion  in  newspapers  and  maga- 


AN  ECONOMIC  EVOLUTION  13 

zines.  Congress  and  legislatures  have  investigated 
and  enacted  laws  concerning  it.  Professors  of  political 
economy  write  learnedly  about  it.  Political  parties 
have  made  it  an  issue,  and  platform,  pulpit  and  stump 
echo  in  its  praise  or  in  its  denunciation. 

In  the  consideration  of  this  all-engrossing 
Trust  an  subject,   the   candid    investigator   finds   it 

accessary  at  the  outset  to  freshly  define  and 
to  classify  trusts.  This  is  more  difficult  than  appears  at 
first  thought.  For  years  the  word  "trust"  has  been 
indiscriminately  and  loosely  used,  both  by  the  friends 
and  the  opponents  of  the  thing  itself.  It  has  been  made 
to  stand  for  almost  everything  in  the  way  of  business 
enterprise.  A  quarter  of  a  million  incorporation  of  a 
retail  dry  goods  establishment;  a  big  railroad  corpora- 
tion, a  gas  company,  a  consolidation  of  two  or  three 
score  manufacturing  concerns  into  one  large  com- 
pany; pools,  corners,  agreements,  and  so  on;  all  these 
and  others  of  similar  and  dissimilar  character  have 
been  unhesitatingly  grouped  under  this  one  head. 

First  as  to  the  meaning  of  the  word.  It  is  really  a 
misnomer.  In  the  strict  sense,  it  is  no  longer  pertinent 
as  a  descriptive  appellation  of  large  corporations, 
although  at  one  time  it  was  rightly  so  used.  When  the 
present  movement  toward  consolidation  began,  these 
organizations  were  actually  put  in  the  form  of  trusts, 
properly  so  called.  The  associated  corporations  placed 
their  stock,  with  its  voting  power,  in  the  hands  of  a 
trustee  or  trustees ;  and  so,  while  the  different  corpora- 
tions retained  their  separate  legal  existence,  they  be- 
came subject  to  a  single,  central  control.  Such  was 
the  original  Standard  Oil  Trust.  But  it  soon  appeared 
that  arrangements  of  this  character  were  plainly  com- 


H  THE    OTHER    SIDE 

binations  in  restraint  Oi  trade  and  easily  reached  under 
the  laws.  Hence  they  were  abandoned  and  have  been 
replaced  by  great  single  corporations,  and  these  for 
want  of  a  better  name  we  continue,  quite  inappropri- 
ately, to  call  trusts. 

As  a  matter  of  actual  fact,  there  never  were 
Real  Significance  more  than  half  a  dozen  real  trusts,  and  now 
of  the  Trust  Idea  •-«*«_  j- 

there  are  none.  The  thing  itself  has  disap- 
peared, but  the  name  has  survived  and  will  probably 
always  cling  to  the  big  consolidated  corporations  that 
have  been  evolved  out  of  the  original  trust  idea. 

At  the  same  time,  in  a  larger  and  more  wholesome 
sense,  the  latter-day  corporations  are  rightly  called 
trusts.  They  hold  in  trust  the  invested  capital  of  thou- 
sands of  stockholders;  they  are  trustees  of  commercial 
enterprise  and  probity,  of  the  welfare  of  vast  armies  of 
employees  and  of  the  interests  of  the  consuming  pub- 
lic. Burdens  and  duties  rest  upon  them  that  were 
unknown  to  the  smaller  individual  firms  and  corpora- 
tions that  they  absorbed.  So  far  as  they  are  faithful  to 
their  new  responsibilities  so  far  will  they  be  successful. 
They  cannot  escape  the  ethical  consequences  of  their 
conduct  of  affairs  by  hiding  behind  the  purely  com- 
mercial and  material. 

Truit  Rightly       There  are  nearly  as  many  definitions  of  the 
Defined  and        word  "trust,"  as  it  is  now  in  vogue,  as  there 
are  minds  to  consider  it.    Beyond  its  gen- 
eral usage  to  include  all  considerable  enterprises  of 
associated  capital  there  is  little  agreement  regarding 
its  exact  sense  and  proper  application.    When  it  comes 
to  details  and  limitations  there  is  an  infinitude  of  diver- 
gent opinion.    As  clear  and  concise  a  definition  as  has 
appeared  is  that  which  was  recently  given  in  the  col- 
umns  of  the   New  York  Independent,  by   John  D. 


AN  ECONOMIC  EVOLUTION  15 

Archbold,  of  the  Standard  Oil  Company.  This  was  as 
follows:  "Trusts  are  large  aggregations  of  capital  for 
the  purpose  of  carrying  on  industries.  How  large  the 
aggregation  must  be  to  constitute  a  trust  no  one 
knows,  nor  is  it  material,  since  the  effects  of  aggrega- 
tion of  capital  are  the  same,  be  the  amount  small  or 
large."  This  definition  has  the  virtues  of  simplicity 
and  calmness.  What  is  also  particularly  good  about  it 
is  that  it  does  not  go  into  argument.  Most  frequently 
those  who  attempt  to  define  trusts,  make  their  explana- 
tions arguments  in  favor  of  or  against  the  idea,  accord- 
ing to  their  personal  bias. 

A  good  detailed  explanation   of   the    character   of 
trusts  comes  from  John  M.  Stahl,  secretary    of    the 
Farmers'  National  Congress.    At  the  Conference  on 
Trusts  of  the  Civic  Federation  of  Chicago,  he  said : 
A  Phas     f         "Trusts  are  the  latest    devices   for   doing 
Industrial  things  in  a  large  way.    They  are  the  latest 

Development  advance  in  a  steady,  persistent  movement 
that  has  dominated  the  industrial  development  of  the 
past  one  hundred  years;  that  has  gathered  the  isolated 
workers  with  tools,  working  alone,  into  shops,  and 
then  has  brought  a  score  of  shops  into  a  factory,  and 
has  then  combined  factories.  While  thus  developing 
the  factory  system  until  the  result  has  been  well  termed 
an  industrial  revolution,  it  has  none  the  less  worked  a 
similar  revolution  in  merchandising,  in  transportation, 
and  in  yet  other  lines  of  human  activity;  always  re- 
sistlessly  absorbing  and  combining  to  put  more  men 
and  greater  means  under  the  control  and  direction  of 
the  masterful  brain  that  has  reached  the  place  it  occu- 
pies by  a  civil  service  indisputably  based  on  merit; 
truly  a  'natural  selection'  in  industry,  always  having  for 


16  THE    OTHER    SIDE 

its  object  doing  things  in  a  larger  way,  because  it  is 
constantly  proved  that  this  is  doing  things  in  a  more 
economical  way  (whether,  all  things  considered,  it  is  the 
best  way,  I  cannot  discuss  here).  Hence  the  trust  is  a 
logical  phenomenon  in  this  industrial  development." 
_  .  Taking  the  foregoing  definition  and  ex- 

Monopolies  Con-  planation  as  eminently  satisfactory,  he  who 
fused  Terms  intends  or  hopes  to  come  to  any  exact  con- 
clusions on  this  subject  must,  before  proceeding  fur- 
ther, settle  one  thing  clearly  in  his  mind.  The  dis- 
tinction that  exists  between  trusts  and  monopolies 
must  be  sharply  and  absolutely  expressed  in  the  most 
unmistakable  terms.  Generally  speaking,  this  is  rarely 
if  ever  done.  In  common  estimation,  trust  and  mon- 
opoly are  regarded  as  one  and  the  same  in  character 
and  purpose,  and  similarly  to  be  dealt  with.  In  fact,  it 
would  be  a  fairer  way  to  put  it  to  say  that  trusts  are 
looked  upon  as  being,  from  their  very  nature,  irreme- 
diably monopolistic ;  that  there  are  no  monopolies  that 
are  not  trusts  and  no  trusts  that  are  not  monopolies. 

It  is  not  surprising  that  the  average  individual 
should  be  led  into  this  confusion,  since  even  students 
have  fallen  into  a  like  misunderstanding,  while  anti- 
trust agitators  have  persistently  fostered  the  erroneous 
idea.  Byron  N.  Holt,  of  the  New  England  Free  Trade 
League,  is  recognized  as  one  of  the  most  conspicuous 
opponents  of  trusts.  In  the  World  Almanac  for 
1900,  he  says:  "Trust,  as  popularly  understood,  means 
a  consolidation,  combine,  pool  or  agreement  of  two  or 
more  naturally  competing  concerns  which  establishes 
a  limited  monopoly  with  power  to  fix  prices  or  rates  in 
any  industry  or  group  of  industries."  That  perhaps  is 
as  fair  a  statement  of  the  popular  misapprehension  as 


AN  ECONOMIC  EVOLUTION  17 

could  be  made.  Under  such  a  definition  it  is  possible 
to  include  nearly  everything  in  the  line  of  organized 
capital  that  any  extremist  might  desire. 

Most  speakers  and  writers  on  this  subject  have 
shown  a  disposition  to  group  nearly  all  concrete  move- 
ments of  capital  under  this  one  head  without -taking 
the  trouble  to  differentiate  them.  Essays  and  books 
have  borne  such  titles  as  "Monopolies  and  Trusts," 
"Trusts,  Pools  and  Corners,"  "Syndicates,  Trusts  and 
Corners,"  and  the  like.  Even  those  who  have  dis- 
coursed under  the  simple  title  of  "Trusts"  have  in- 
cluded therein  pools,  syndicates,  corners,  railway  cor- 
porations and  all  the  vast  array  of  speculative  enter- 
prises of  various  sorts  and  monopolistic  corporations 
without  end. 
Natural  Monop.  There  are  monopolies  and  there  are  trusts. 

p!-op7rtitsthper.  In  a  class  entirely  b7  themselves  should  be 
taining  to  Them  placed  such  natural  monopolies  as  railroads, 
street  railways,  gas  companies,  electric  light  com- 
panies, and  other  corporations  of  like  character.  The 
existence  and  prosperity  of  these  institutions  are  based 
upon  special  privileges  granted  by  city,  State  or 
nation,  and  in  a  large  sense  they  have  public  duties  to 
perform. 

Corporations  of  this  description  are  nothing  new. 
They  have  been  part  and  parcel  of  our  civic  life  for 
more  than  half  a  century.  To  a  considerable  extent, 
they  are  under  government  control  and  their  semi-pub- 
lic character  is  fully  recognized.  They  are  nowise  to 
be  classed  as  trusts,  because  certain  rights  and  duties 
assigned  to  them  are  quite  without  the  province  of 
other  industrial  organizations  not  engaged  in  public 
utilities  and  specially  determine  their  character.  Mr. 

4 


18  THE    OTHER    SIDE 

Holt,  who  has  just  been  quoted,  says  that  these  natural 
monopolies  "are  not  to  be  classed  as  trusts  because 
they  are  not  composed  of  naturally  competing  con- 
cerns." 

.-         The  absurdity  of  this  reasoning   must   be 
Strongest  Compc-  * 

titionBetweenNat- apparent  to  any  one  who  is    even    super- 

ural  Monopolies  ficiany  acquainted  with  the  history  of  rail- 
road, gas,  electric  light  and  power,  street  railway  and 
telephone  consolidations  of  the  last  dozen  years.  Be- 
tween organizations  of  that  kind  competition  has  been 
fiercer  and  more  disastrous  than  was  ever  known 
between  the  so-called  "naturally  competing"  produc- 
ing industries.  Look  at  the  gas  war  in  New  York  that 
in  1899  brought  the  price  of  gas  down  to  sixty-five 
cents  per  thousand  feet;  look  at  the  competition  of  gas 
companies  in  Boston,  Chicago  and  other  cities;  look 
at  the  rate  cutting  that  has  driven  so  many  railroads 
into  bankruptcy  and  finally  into  absorption  by  other 
corporations;  look  at  the  competition  between  street 
railways  in  New  York,  Boston  and  elsewhere  that  has 
irresistibly  forced  consolidation  under  a  single  man- 
agement to  the  infinite  advantage  of  invested  interests 
and  the  public  at  large.  The  natural  monopolies  cer- 
tainly possess  privileges  that  establish  them  in  a  class 
by  themselves,  but  immunity  from  competition  is  not 
one  of  their  prerogatives. 

It  is  not  the  purpose  of  this  volume  to  dis- 
cuss    industrial    organizations    that    come 
under  the  head  of  natural  monopolies.  That 
would  inevitably  lead  to  a  consideration  of  government 
and  municipal  ownership  which  is  already  agitated  as 
a  remedy  for  evils  that  are  held  by  many  to  be  inherent 
of  private  undertakings  of  this  character. 


AN  ECONOMIC  EVOLUTION  10 

The  mere  suggestion  of  public  ownership  in  this 
connection  reveals  at  once  the  profound  difference 
between  these  semi-public  corporations  that  serve  com- 
munities and  the  business  concerns  engaged  in  pro- 
ducing and  in  supplying  the  needs  of  individuals.  No 
one,  save  perhaps  the  extreme  socialist,  has  yet  gone 
so  far  as  to  argue  that  the  government  should  acquire 
and  control  oil  wells,  sugar  refineries,  tanneries,  paper 
mills,  potteries,  flour  mills,  distilleries  and  rubber  fac- 
tories. These  aggregations  of  capital  stand  in  a  class 
by  themselves,  entirely  distinct  from  all  others.  They 
are  the  outgrowth  of  altogether  different  conditions, 
and  have  been  developed  amid  different  surroundings 
and  from  different  causes.  They  are  working  out 
industrial  problems,  particularly  those  that  affect  the 
relations  of  capital  and  labor,  in  a  way  peculiar  to 
themselves. 

Organizations  of  this  kind  are  the  real  trusts,  using 
the  term  now  in  its  commonly  accepted  sense.  They 
constitute  such  an  entirely  new  form  of  industrial  activ- 
ity that  railroads  and  the  like  are  seen  to  be  wholly 
unrelated  to  them,  although  all  in  a  measure  act  and 
counteract  upon  each  other.  Exclusively  to  their  con- 
sideration are  these  pages  devoted. 
_  ..  ..  Evolution  is  ceaselessly,  untiringly  at  work 
Product  of  Indus-  in  nature,  in  civilization,  in  national  devel- 
trial  Progress  opment,  in  every  branch  of  human  en- 
deavor. Just  now  its  wonderful  manifestations  are 
most  conspicuous  in  the  world  of  capital.  To  a  super- 
ficial or  hasty  observer,  this  latter-day  phenomenon  ap- 
pears to  be  something  entirely  new.  It  is  not  that, 
however.  It  is  simply  the  display  in  another  direction 
of  agencies  that  have  always  been  at  work  from  the  be- 


20  THE    OTHER    SIDE 

ginning  of  creation.  Step  by  step  the  movement  has 
been  for  ages  toward  increase  in  organized  force.  The 
evolution  has  carried  us  rapidly  through  multifarious 
forms  of  progress  until  now  we  are  confronted  with 
vast  developments  that  have  come  by  natural  process 
from  social,  economic  and  industrial  tendencies. 

As  far  back  in  the  history  of  the  world  as 


Ancient  Origin      the  time  of  the  ancient  Greeks  and  Romans, 
of  Corporations  .  . 

corporations  and  combinations    of   capital 

were  plentiful.  Under  the  early  Roman  law  corpora- 
tions could  be  formed  at  the  will  of  the  promoters 
without  any  special  State  authorization.  When  the 
Empire  came  in,  the  Emperors  asserted  their  right  to 
grant  or  refuse  the  privilege  of  incorporation,  accord- 
ing as  they  might  deem  it  to  their  advantage,  or  to  the 
welfare  of  the  State. 

In  the  Epistles  of  Pliny  an  incident  is  related  that 
shows  how  corporations  were  even  then  sometimes 
looked  upon  askance.  Pliny  tells  the  story  of  his  ex- 
perience with  the  Emperor  Trajan,  to  whom  he  sug- 
gested that  a  company  of  firemen  might  be  organized. 
"I  will  take  care,"  he  added,  "that  none  but  those  of 
that  business  shall  be  admitted  into  it,  and  that  the 
privileges  granted  them  shall  not  be  applied  to  any 
other  purpose.  As  this  incorporated  body  will  be  re- 
stricted to  so  small  a  number  of  members,  it  will  be 
easy  to  keep  them  under  regulations."  The  Emperor, 
declining  to  grant  the  permission,  added:  "Whatever 
name  we  give  to  them,  and  for  whatever  purposes  they 
may  be  founded,  they  will  not  fail  to  found  themselves 
into  factious  assemblies,  however  short  their  meetings 
may  be." 

As  for  combinations  in  the  iron  trade,  we  have  a 


AN  ECONOMIC  EVOLUTION  21 

record  of  one  which  was  established  more  than  two 
thousand  years  ago,  for  Aristotle  tells  us  that  "there  was 
a  man  in  Syracuse,  in  the  days  of  Dionysius  the  Ty- 
rant, who  bought  all  the  iron  in  the  island  of  Sicily 
and  was  able  to  sell  it  at  such  prices  as  he  pleased,  and 
thereby  made  large  profits.  When  Dionysius  the  Ty- 
rant heard  of  this  he  was  pleased  with  the  ingenuity 
of  the  man,  and  told  him  that  he  might  keep  his  money, 
but  had  better  leave  Syracuse." 

English  law  in  respect  to  corporations  was  fashioned 
by  these  ancient  impressions  when  taking  civil 
instead  of  ecclesiastical  form.  Then  followed  the 
organization  of  guilds  in  trade  and  commerce  and 
universities.  To  a  great  extent,  in  these  times  of  com- 
binations and  trust  organization,  the  corporation  has 
taken  on  the  idea  wholly  of  corporate  personality. 
This  is  in  complete  distinction  from  the  early  usage 
when  the  idea  of  public  utility  alone  prevailed. 

More  than  a  century  ago  Blackstone  said:  "When 
it  is  for  the  advantage  of  the  public  to  have  any  par- 
ticular rights  kept  on  foot  and  continued,  to  construct 
artificial  persons,  who  may  maintain  a  perpetual  suc- 
cession and  enjoy  a  kind  of  legal  immortality,"  the  law 
authorizing  corporation  seems  necessary  and  proper. 
Note  that  he  predicated  the  need  of  this  form  of  organi- 
zation "for  the  advantage  of  the  public."  In  early 
times,  and  indeed  until  recent  years  in  this  country, 
the  idea  and  principle  of  advantage  to  the  public  was 
the  purpose  of  law  in  authorizing  corporations,  and 
also  was  the  measure  of  their  limitations. 
From  Individual  EnSlish  industrial  conditions  were  the  pre- 
Ubor  to  cursors  of  those  in  the  United  States.  Orig- 

Partnerships         inaily  in  the  old  country  every  individual 


22  THE    OTHER    SIDE 

worked  or  did  business  independently  for  himself.  This 
continued  during  what  have  been  termed  the  home 
period,  the  guild  period,  and  the  domestic  period. 
Laboring  and  merchandising  were  then  in  the  most 
primitive  state.  Gradually,  however,  as  the  demands 
of  industry  increased  and  broadened,  productive  enter- 
prise was  compelled  to  concentrate.  Capital  appeared 
and  gave  employment  to  workers,  and  so  the  employ- 
ing and  employed  classes  were  developed.  Larger 
enterprises  of  manufacturing,  mining  and  commerce 
called  for  the  association  of  capital  in  order  to  carry  on 
business  to  the  best  advantage.  Partnerships  became 
common,  and  to  some  extent  corporations  early  suc- 
ceeded the  partnership  form  of  doing  business.  This, 
briefly  put,  was  the  condition  of  affairs  in  England 
down  to  the  beginning  of  the  eighteenth  century.  The 
wage  system  became  common  and  the  way  was  opened 
for  its  complete  development  on  strictly  competitive 
lines,  just  as  soon  as  the  approaching  factory  system 
should  render  such  development  necessary  to  the 
greatest  success  of  the  employer  and  the  greatest 
advantage  of  the  employee. 

Develo  in*  of      ^n  ^e  United  States  industrial  development 
American  began  slowly.    It  was  retarded  by  the  con- 

Manufactures  ditions  relating  to  the  settlement  and  sub- 
jugation of  a  new  country,  and  by  adverse  English 
legislation  that,  until  the  beginning  of  our  national 
existence,  aimed  to  repress  all  colonial  manufacturing. 
When,  however,  national  independence  gave  a  stimu- 
lus to  national  enterprise,  all  forms  of  industry  went 
forward  with  giant  strides.  In  less  than  half  a  century 
we  were  rivaling  the  mother  country  in  the  diversity 
and  the  importance  of  our  manufacturing  activities. 


AN  ECONOMIC  EVOLUTION  23 

With  us,  both  theory  and  practice  were  at  the  outset 
opposed  to  the  corporate  method  of  doing  business. 
Individualism  was  the  foundation  upon  which  the 
fathers  of  the  republic  built  the  political,  social  and 
industrial  structure.  The  laisses  faire  or  let-alone 
theory  was  dominant  in  the  world  then,  and  the  found- 
ers of  the  republic  were  influenced  by  it.  In  the  first 
half  of  the  present  century  the  physiocratic  principles 
permeated  all  American  life.  A  belief  in  the  blessings 
of  a  minimum  of  government  and  a  disinclination  for 
the  interference  of  society  with  the  sphere  of  the  indi- 
vidual was  more  widely  diffused  than  in  any  other 
country.  Absolute  free  competition  in  all  industry 
was  a  fundamental  doctrine  of  national  faith. 

During  the  last  three-quarters  of  a  century 

Sm'lndu/try  industry  has  made  marvelous  progress 
throughout  the  civilized  world.  In  this  on- 
ward march  the  United  States  have  held  a  leading  and 
conspicuous  place.  We  have  been  notably  a  nation  of 
wealth  producers  and  distributors.  Our  history  is  a 
record  of  masterly  effort  to  wring  from  the  strong- 
holds of  nature  the  material  gains  that  have  enriched 
us.  Inventive  genius  has  lightened  the  labor  of  hands 
and  at  the  same  time  increased  production  and  con- 
sumption to  almost  fabulous  figures.  Business  sagac- 
ity and  enterprise  have  developed  commercial  organi- 
zation into  a  powerful  machine  to  co-operate  with 
labor  and  invention  for  the  general  good. 

The  factory  system  that  was  to  revolutionize  the 
labor  activities  of  mankind,  began  to  exercise  its  influ- 
ence in  England  as  early  as  1730,  when  Watts'  roller 
spinning  was  introduced.  It  gradually  expanded 
through  successive  inventions  of  Hargreaves,  Ark- 


84  THE    OTHER    SIDE 

wright,  Crompton  and  Cartwright,  until  it  reached  its 
fruition  in  cotton  manufacturing  in  the  throstle  and 
the  Bullough  power  loom  of  the  middle  of  the  nine- 
teenth century.  The  impetus  that  was  given  by  cotton 
manufacturing  was  followed  in  other  branches  of  tex- 
tile industry.  In  contemporaneous  times  these  have 
been  altogether  surpassed  by  discoveries  and  inven- 
tions almost  infinite  in  number.  Coal  and  iron,  gold, 
silver  and  copper  mines,  gas,  electricity  and  transpor- 
tation have  given  a  scope,  a  power,  and  a  value  to 
man's  labor  that  the  wildest  imaginations  of  a  half  cen- 
tury ago  did  not  even  suggest. 

Fifty  years  ago,  the  mother  of  the  house- 
From  Hand  Labor  hol(j  took  a  week  to  knit  a  pair  of  stOck- 
to  Factory  • 

ings,  and  the  labor  cost  put  into  them  was 

not  more  than  a  few  cents.  Fifty  years  ago  hand  looms 
were  used  to  weave  cloth  in  every  farmhouse  through- 
out the  country.  Wool  was  carded  at  home,  rag  car- 
pets, homemade,  covered  the  floors.  Farmers  mowed 
their  fields  with  scythes,  the  blacksmith  forged  the 
horseshoes  for  the  village,  the  seamstress  made  the 
clothes  that  the  girls  and  boys  wore,  and  everybody 
depended  upon  the  shoemaker  for  footwear. 

All  that  is  changed  now.  Machinery  and  factories 
have  superseded  individual  labor.  Our  knit  goods,  our 
shirts,  indeed  all  things  we  wear,  have  gone  into  the 
factory  to  be  made  because  they  can  be  made  better 
and  cheaper  than  they  ever  could  be  by  individual 
workers.  The  mowing  machine,  the  reaper,  the  raker 
and  binder  enable  one  or  two  men  to  do  the  work  of 
twenty. 

With  the  abandonment  of  the  spinning  wheel  and 
the  knitting  needle  by  our  grandmothers  began  the 


AN  ECONOMIC  EVOLUTION  «8 

end  of  the  individual  in  industry,  and  the  beginning  of 
that  onward  march  of  combination  that  we  see  in  its 
fullest  expression  to-day  in  the  form  of  trusts.  Cart- 
wright's  power  loom  gives  employment  to  half  a  mil- 
lion people  in  the  United  States,  and  their  wages 
amount  to  one  hundred  and  sixty  million  dollars  per 
year.  Whitney's  cotton  gin  enables  us  to  put  on  the 
market  every  year  two  hundred  and  fifty  million  dollars' 
worth  of  cotton  goods  at  a  price  which  makes  cloth- 
ing plentiful  and  cheap,  but  still  gives  employment  to 
hundreds  of  thousands  at  good  wages  and  brings  to 
capital  a  fair  return. 

Corporate  Power  From  out  of  these  inevitable  conditions 
Ch^L?.*.  arose  the  corporation.  When  the  factory 
Conditions  came,  the  foundry  and  the  great  manufac- 
turing establishments,  ever  growing  bigger  and  bigger 
in  response  to  the  ever-increasing  demand  of  the  con- 
suming public,  it  was  no  longer  possible  for  the  in- 
dividual worker  to  meet  the  situation.  The  formation 
of  industrial  armies  followed  as  a  matter  of  course. 
Factories  must  needs  be  stocked  with  expensive  ma- 
chinery, and  much  of  it.  Large  monthly  pay  rolls 
must  be  provided  for.  Selling  distributed  over  exten- 
sive territories  became  expensive.  Long  credits  were 
also  soon  an  essential  feature  of  successful  trading. 

Few  individuals  could  hope  to  do  business  singly 
under  the  changed  order  of  things.  Larger  capital  was 
required  than  any  one  man  could  control.  Partner- 
ships were  for  a  time  efficacious  to  a  certain  extent.  In 
a  rather  limited  way  they  even  now  exist,  but  not  in  the 
great  industries.  The  undertakings  of  modern  pro- 
ductive enterprise  are  of  such  magnitude  that  anti- 
quated forms  of  business  machinery  are  wholly  insuf- 
ficient to  the  demands  made  upon  them. 


96  THE    OTHER    SIDE 

The  corporation  in  its  first  days  was  not  in 
favor  in  England,  and  the  feeling  against 
it  found  frequent  expression  in  the  common 
law.  The  people  then  were  as  much  alarmed  at  this 
phase  of  business  activity  as  they  are  now  concerned 
over  the  appearance  of  the  big  corporations  that  are 
naturally  succeeding  their  smaller  predecessors.  It  was 
not  that  the  corporation  idea  was  new,  but  it  was  sud- 
denly developed  as  never  before  and  awful  things  were 
predicted  of  it.  Many  conservative  men  sought  to 
allay  the  public  fear  by  soothing  argument.  Among 
others  came  Adam  Smith,  the  great  political  econo- 
mist, who  declared  that  corporations  could  never  do 
much  harm  because  only  a  few  simple  routine  branches 
of  business  could  possibly  be  carried  on  by  them,  inas- 
much as  people  would  not  work  for  corporations  as 
they  would  work  for  themselves.  In  the  United  States 
similar  hostility  to  corporations  was  exhibited  even 
down  to  the  middle  of  the  nineteenth  century. 

Nevertheless,  the  corporation  had  to  come  whether 
the  people  fancied  it  or  not.  The  individual  capitalist 
was  powerless  face  to  face  with  exigencies  beyond  his 
control.  The  association  of  a  few  individuals  in  a  part- 
nership was  better,  but  was  still  inadequate.  The  con- 
solidation of  capital  in  a  corporation  was  the  only  form 
of  business  organization  equal  to  the  situation,  and  it 
became  the  dominant  power  in  the  industrial  world. 
A  few  of  the  old  forms  of  business  exist  as  staid  relics 
of  the  past,  but  the  fact  that  even  the  most  indifferent 
schemes  now  seek  incorporation  is  a  significant  evi- 
dence of  the  spirit  of  the  age. 

The  small  corporation  has  had  its  day.  Like  the 
individual  and  the  partnership,  it  has  done  its  wrork, 
and  has  done  it  well  all  over  the  world.  Especially  in 


AN    ECONOMIC  EVOLUTION  27 

From  Corpora,     the  United  States  it  has  been  a  potent  factor 

Amalgamation       in  bringin&  about  a  marvelous  prosperity. 

of  Corporations  It  has  safeguarded  the  interests  of  capital, 
promoted  the  welfare  of  labor,  and  added  to  the  com- 
fort and  welfare  of  the  entire  people. 

But  the  small  corporation  is  no  longer  a  thing  to  be 
reckoned  with  seriously.  It  will  always  remain,  but 
for  large  enterprises,  it  has  been  superseded  by  those 
great  aggregations  of  capital  that  for  want  of  a  better 
term  we  call  trusts.  These  combinations  are,  after  all, 
only  corporations  on  a  large  scale,  and  it  is  interesting 
to  note  that  the  corporation  still  remains  dominant, 
changed  only  in  size,  and  not  in  form.  It  is  the  highest 
development  of  the  centralization  idea,  manifested  in 
capital  and  industry. 

Genesis  of  Com-  ^  *s  not  difficult  to  discover  the  causes  that 
binations  of  have  led  to  these  combinations.  Most  peo- 
Capital  p]Cj  perhapS)  iook  UpOn  them  as  the  out- 

come of  the  pernicious  activity  of  promoters  seeking 
to  enhance  their  profits  at  the  expense  of  the  public. 
On  the  contrary,  they  often  have  been  the  products  of 
business  adversity,  not  of  prosperity.  Not  infrequently, 
indeed,  they  have  risen  out  of  bankruptcy.  The  opera- 
tors who  have  been  interested  in  them  have  not  alto- 
gether been  the  free  managers  of  their  own  affairs. 
Compassed  about  by  conditions  that  they  could  not 
wholly  control,  they  have  found  it  necessary  to  yield  to 
the  inexorable  trend  of  events.  To  a  considerable  ex- 
tent they  have  been  powerless  to  withstand  the  work- 
ings of  the  irresistible  economic  law  that  has  operated 
to  bring  about  the  consolidation  of  capital  and  of 
labor. 

So  long  as  individual  establishments  are  prosperous, 


K  THE    OTHER    SIDE 

earning  good  profits  on  their  capital,  you  hear  no  talk 
of  combination.  Every  owner  prefers  to  be  inde- 
pendent, and  does  not  sacrifice  his  business  personality 
until  he  is  compelled  to.  It  is  only  when  competition 
has  become  ruinous,  and  when  prices  of  his  product 
are  reduced  to  figures  that  are  often  on  the  losing  side, 
that  he  is  willing  to  yield  to  the  inevitable  and  sink 
himself  and  his  establishment  in  a  trust. 
How  Business  Some  years  ago,  in  an  article  in  the  North 

Adversity  Leads    American   Review,  Andrew   Carnegie  ex- 
to  the  Organize 

tion  of  a  Trust  plained  the  causes  that  conduce  to  the  for- 
mation of  trusts.  His  explicit  statement  is  quite  as 
applicable  now  as  it  was  then.  As  he  puts  it,  demand 
exists  for  a  certain  article  beyond  the  capacity  of 
existing  works  to  supply  it.  Prices  are  high  and 
profits  tempting.  Every  manufacturer  of  that  article 
immediately  proceeds  to  enlarge  his  works  and  in- 
crease their  producing  power.  In  addition  to  this,  the 
unusual  profits  attract  the  attention  of  his  managers 
or  those  who  are  interested  to  a  greater  or  less  degree 
in  the  factory.  These  communicate  the  knowledge  of 
the  prosperity  of  the  works  to  others.  New  partner- 
ships are  formed,  and  new  works  are  erected,  and  be- 
fore long  the  demand  for  the  article  is  fully  satisfied, 
and  prices  do  not  advance. 

In  a  short  time  the  supply  becomes  greater  than  the 
demand;  there  are  tons  or  yards  more  in  the  market 
for  sale  than  required,  and  prices  begin  to  fall.  They 
continue  falling  until  the  article  is  sold  at  cost,  and 
even  sometimes,  until  the  best  managed  and  best 
equipped  factory  is  not  able  to  produce  the  article  at 
the  price  at  which  it  can  be  sold. 


AN  ECONOMIC  EVOLUTION  28 

_  When  an  article  was  produced  by  a  small 

Urge  Concerns  / 

Must  Keep  Going  manufacturer,  employing,  probably  at  his 
Even  at  a  Loss  own  home,  two  or  three  journeymen  and  an 
apprentice  or  two,  it  was  an  easy  matter  for  him  to  limit 
or  even  to  stop  production.  As  manufacturing  is  car- 
ried on  to-day,  in  enormous  establishments  with  mil- 
lions of  dollars  of  capital  invested,  and  with  thousands 
of  workers,  it  costs  the  manufacturer  much  less  to  run 
at  a  loss  per  ton  or  yard  than  to  check  his  production. 
Stoppage  would  be  serious.  The  condition  of  cheap 
manufacture  is  running  full.  Twenty  sources  of  ex- 
pense are  fixed  charges,  many  of  which  stoppage 
would  only  increase. 

Therefore  the  article  is  produced  for  months,  and  in 
some  cases  for  years,  not  only  without  profit  or  without 
interest  upon  capital,  but  to  the  impairment  of  the  capi- 
tal invested.  Manufacturers  have  balanced  their  books 
year  after  year  only  to  find  their  capital  reduced  at 
each  successive  balance.  While  continuing  to  produce 
may  be  costly,  the  manufacturer  knows  too  well  that 
stoppage  would  be  rain.  His  brother  manufacturers 
are  in  the  same  condition.  They  see  the  savings  of 
many  years,  as  well  perhaps  as  the  capital  they  have 
succeeded  in  borrowing,  becoming  less  and  less,  with 
no  hope  of  a  change  in  the  situation.  It  is  in  soil  thus 
prepared  that  anything  promising  relief  is  gladly  wel- 
comed. To  recoup  themselves,  to  secure  again  the 
prosperity  that  they  once  enjoyed,  they  find  them- 
selves compelled  to  sacrifice  their  independent  indi- 
viduality as  manufacturers,  and  become  simply  units 
in  the  great  system  of  consolidated  capital,  just  as  the 
workingmen  long  ago  became  only  units  of  an  indus- 
trial system  instead  of  independent  laborers. 


80  THE    OTHER    SIDE 

Thus  we  see  that  the  trust  is  an  evolution, 

f  a  Srand  steP  in  the  march  o£  the  world 
toward  a  higher  and  better  stage  of  de- 
velopment. It  is  the  product  of  natural  forces  that 
have  been  quite  beyond  the  power  of  men  to  with- 
stand, but  that  they  have  been  in  some  measure  able 
to  utilize  to  their  advantage.  Concentration  of  capital 
has  come  in  response  to  the  imperative  demands  of 
modern  civilization  and  modern  industrial  progress. 
It  represents  the  maturest  expression  of  human 
endeavor  in  industrial  and  commercial  life.  Born  in 
the  exigencies  of  an  excessive  struggle  for  superiority, 
it  makes  toward  the  higher  attainments  and  the 
greater  success  of  the  race. 


AMALGAMATION  OF  CORPORATIONS 

AN  OUTGROWTH  OF  THE  ORIGINAL  TRUST  IDEA— HOW  THESE 
ORGANIZATIONS  HAVE  STEADILY  INCREASED  IN  NUMBER,  IN 
IMPORTANCE  AND  IN  CAPITAL  INVESTED— SOME  RECENT 
STATISTICS  CONCERNING  THEM 

Earl  Attem  ts  Various  experiments  were  tried  in  the 
to  Improve  Busi.  attempt  to  readjust  business  to  changed 
nes*  Conditions  industrial  conditions  before  the  form  of 
capital  consolidation  was  adopted.  Vanishing  profits 
was  the  inciting  cause  of  all  these  attempts,  and  origin- 
ally men's  minds  were  turned  to  the  one  idea  of 
increasing  profits  by  raising  prices.  That  was  natural. 
A  man  does  not  so  soon  think  of  reducing  cost  of 
production  as  he  does  of  adding  a  few  cents  to  his  sell- 
ing price.  It  is  apparently  so  much  easier  to  charge 
a  little  more  than  it  is  to  cut  down  expenses.  Economy 
is  no  more  popular  with  a  man  in  his  business  than  it 
is  with  him  in  his  personal  affairs.  It  is  only  resorted 
to  as  a  last  necessity. 

Accordingly  we  find  that  when  business  seemed  to 
be  rapidly  tending  toward  a  point  where  it  would  be 
done  at  a  loss,  or  at  least  without  much  profit,  corners, 
pools,  syndicates,  trade  associations,  and  the  like  were 
invented.  These  were  mere  manipulations  of  prices. 
Their  entire  intent  was  to  control  products  so  as  to 
arbitrarily  fix  prices  at  profitable  figures,  without 
regard  to  supply  and  demand. 


32  THE    OTHER    SIDE 

_  „       .  Of  course  they  all  failed,  for  they  were 

Failure  of  Synch-  J    .  .... 

cate  and  Pool       wholly  uneconomic  and  in  direct  opposition 

Plans  to  established  forms  of  business.  The 

celebrated  Copper  Syndicate  of  France,  that  had  such 
a  meteoric  career  for  a  few  years,  furnishes  a  striking 
illustration  of  the  futility  of  hoping  for  enduring  pros- 
perity out  of  such  measures.  The  copper  trust  pro- 
posed to  acquire  the  command  of  the  copper  supply 
of  the  world,  and  to  limit  production  so  as  to  create  an 
artificial  scarcity  of  the  metal,  and  a  consequent 
increase  of  its  value. 

The  combination  succeeded  in  securing  the  floating 
stock  of  the  market,  and  in  controlling  the  output  of 
most  of  the  mines  of  the  world.  For  a  year  or  so  it 
made  enormous  profits,  but  soon  consumers  refused 
to  buy  at  the  high  prices  to  which  the  metal  was  forced. 
The  Syndicate  found  itself  loaded  more  and  more 
heavily  with  a  stock  that  it  could  not  dispose  of  to  an 
unwilling  public.  Within  two  years  from  the  time  it 
had  started  it  went  to  pieces,  ruining  nearly  everybody 
interested  in  it. 

Other  pools  and  syndicates  have  practically  repeated 
the  history  of  the  French  copper  trust.  We  have  had 
examples  of  them  in  the  United  States.  They  have 
failed  because  they  have  attempted  to  accomplish 
economic  impossibilities,  or  because  those  interested 
in  them  have  fallen  out  with  each  other.  It  is  easy 
enough  to  raise  prices,  but  when  they  are  raised 
beyond  a  reasonable  point,  people  stop  buying.  That 
is  the  rock  upon  which  all  attempts  to  unduly  inflate 
prices  are  ultimately  wrecked. 

When  it  was  found  to  be  impossible  to  successfully 
maintain  pools,  syndicates  and  corners,  with  the  single 


AMALGAMATION  OF  CORPORATIONS  33 

From  Trusts  to  idea  in  view  of  raisinS  prices,  the  thoughts 
Consolidation  of  of  men  turned  to  originating  some  other 
Corporations  pjan  to  ^Q  awav  with  excessive  competition 

and  its  resultant  loss.  The  first  trust  was  a  purely 
American  idea.  It  was  based  upon  an  entirely  different 
principle  from  that  which  underlay  the  pool  and  corner 
plans,  for  it  was  devised  to  rehabilitate  industries  by 
establishing  economies  through  the  co-operation  of 
hitherto  competing  elements. 

Although  the  original  trust  was  short-lived,  because 
it  proved  to  be  legally  vulnerable  as  to  its  form,  the 
theory  upon  which  it  was  based  was  seen  to  be 
economically  sound  and  financially  practicable.  It 
only  remained  to  put  it  into  another  form  that  should 
not  contravene  established  principles  of  law.  That 
form  was  easily  found  in  the  corporation  that  has  be- 
come firmly  established  as  a  factor  of  industrial 
progress  and  an  essential  part  in  all  modern  life.  It 
was  a  single  step,  and  a  comparatively  easy  one,  from 
the  trust  method  of  putting  many  corporations  into 
the  hands  of  trustees,  to  be  operated  in  common,  to  the 
creation  of  a  large  corporation  with  abundant  capital, 
to  become  the  actual  owner  of  the  many  small  cor- 
porations that  it  essayed  to  absorb. 

As  soon  as  it  was  made  clear  that  the  cor- 
A  Marvelous 

Movement  of  porate  form  of  business  was  adequate  to  the 
CaPltal  new  demands  for  the  consolidation  of  capi- 

tal, a  financial  movement  set  in  among  the  industrial 
enterprises  of  the  country  in  a  manner  that  astounded 
the  world.  For  more  than  ten  years  it  has  continued, 
and  all  attempts  to  stay  its  progress  have  been  in  vain. 
At  no  time  has  it  been  possible  to  clearly  determine 
the  extent  of  the  new  movement,  the  number  of  inter- 


34  THE    OTHER    SIDE 

ests  involved,  the  amount  of  actual  capital  invested, 
or  its  exact  condition. 

The  statistician  has  revelled  in  figures  concerning 
the  thousands  of  new  corporations  that  have  been 
chartered.  We  have  been  told  of  the  billions  of  capi- 
tal involved,  but  the  most  reliable  figures  that  have 
been  attainable  have  only  incompletely  told  the  story. 
On  the  one  hand,  they  have  erred  on  the  side  of  in- 
sufficiency of  information.  On  the  other  hand,  they 
have  given  overmuch  credence  to  floating  reports  and 
to  unstable  announcements  of  a  more  or  less  fictitious 
or  superficial  character.  It  has  only  been  necessary 
to  have  it  announced  that  some  new  corporation  has 
been  chartered  in  New  Jersey  or  Delaware  with  a 
capital  of  $10,000,000  or  $15,000,000  to  have  it  forth- 
with included  among  the  great  trusts  of  the  country, 
without  anyone  stopping  to  seriously  investigate 
whether  it  may  or  may  not  have  anything  more  than 
a  mere  paper  existence. 

Estimates  Con-  Arthur  T-  Hadley>  president  of  Yale  Uni- 
cerning  Amalga-  versity,  has  made  the  statement  in  a  maga- 
mated  Capital  zjne  artide  that  «in  the  year  ^  the  new 

companies  formed  in  the  United  States  for  pur- 
poses of  industrial  combination  had  a  capital  of  over 
$900,000,000."  He  also  added  that,  "in  the  earlier 
half  of  1899,  the  capital  of  the  new  companies  of  this 
character  was  $3,100,000,000."  In  the  New  York 
Herald  of  June  15,  1899,  there  was  a  tabulated  list  of 
the  trusts  established  in  1898.  This  gave  the  number 
of  such  corporations  as  ninety-two  with  preferred 
stock,  $334,791,900,  and  common  stock,  $957,957,300, 
making  a  total  of  $1,292,749,200. 

These  figures  of  capitalization  were  in    many    in- 


AMALGAMATION  OF  CORPORATIONS  35 

stances  estimated,  being  based  upon  the  known  or 
estimated  capital  of  the  combined  companies.  Out  of 
the  ninety-two  concerns  listed,  twenty-six  were  rail- 
way, gas,  electric,  telephone  and  other  companies  of 
like  character,  leaving  sixty-three  purely  industrial 
corporations.  These  had  a  capitalization  of  $318,- 
966,900  preferred  stock,  and  $671,042,000  common 
stock,  making  a  total  of  $990,008,900. 

A  writer  in  the  American  Law  Review  for  De- 
cember, 1899,  said  that  during  the  fiscal  year  ending 
September  29,  1899,  the  corporation  department  of  the 
State  of  New  Jersey  issued  charters  for  more  than  two 
thousand  corporations,  with  a  capitalization  of  $3,500,- 
000,000.  The  same  writer  estimated  that  at  the  close 
of  the  year  of  1899,  15,000  trusts  had  been  incorpor- 
ated in  New  Jersey,  95  per  cent,  of  the  entire  country, 
with  a  capitlization  upward  of  $8,000,000,000. 

A.  B.  Nettleton,  former  Assistant  Secretary 
An  Ex-Treasury 
Official's  of  the  United  States  Treasury,  m  his  work 

Opinions  on  "Trusts  or  Competition  ?"  says  that  there 

are  130  principal  trusts  and  consolidations  in  the 
United  States,  each  capitalized  at  $10,000,000  or  more. 
The  aggregate  common  stock  of  these  amounts  to 
$2,784,218,000.  The  preferred  stock  is  given  as 
$1,141,643,000  and  the  bond  issues  as  $88,288,000, 
making  a  total  of  $4,014,149,000. 

According  to  the  same  authority,  the  estimated 
combined  capital  stock  and  bonds  of  general  corporate 
trusts  in  the  United  States  of  less  than  $10,000,000 
each  amounts  to  $600,000,000.  The  estimated  capital 
stock  and  bonds  of  local  corporate  trusts,  each  hav- 
ing a  virtual  monopoly  in  its  own  field,  not  including 
tramway  or  transportation  companies,  syndicates, 


36  THE    OTHER    SIDE 

combines,  or  other  trade  agreements,  is  $385,851,000. 
Thus  an  approximate  grand  total  is  figured  out  of 
$5,000,000,000. 

An  examination  of  Mr.  Nettleton's  list  demonstrates 
again  what  constantly  meets  the  investigator  of  this 
subject.  It  is  impossible  to  find  any  classification  of 
the  so-called  trust  organizations,  or  any  presentation 
of  their  numbers  and  the  amount  of  capital  invested 
in  them  that  is  in  any  way  satisfactory:  one  is  almost 
inclined  to  say  intelligible. 

Mr.  Nettleton  says  of  his  list:     "The  aim 
Confusion  in  ...  .     ,         .   , 

Trust  Classified-    has  been  to  include  only    such    industrial 

tion  undertakings  as  involve    the    combination 

of  two  or  more  concerns,  and  for  the  most  part,  each 
organization  named  is  a  typical  trust,  which  means  a 
single  corporation  that  has  purchased  the  plants  and 
businesses  of  all  or  a  great  majority  of  competing  con- 
cerns in  the  same  line  in  the  country,  so  as  to  control 
the  industry  and  enjoy  a  virtual  monopoly  thereof." 

No  mention  is  made  of  trade  agreements  and  asso- 
ciations of  independent  and  competing  concerns,  on 
the  ground  that  they  seldom  fix  and  cannot  long 
maintain  exorbitant  prices.  The  trusts  that  are  merely 
local  in  their  existence  and  locally  limited  in  their 
operations  have  been  excluded,  as  have  also  all  the 
individual  industrials  engaged  in  production  on  a 
large  scale,  but  still  competitive,  like  the  Carnegie 
Steel  Company,  the  Baldwin  Locomotive  Works,  the 
Federal  Steel  Company,  and  others. 

Nevertheless,  the  list  includes  the  Amalgamated 
Copper  Company,  several  ice  companies,  several  iron 
and  steel  companies,  the  Borden  Condensed  Milk 
Company,  the  Lake  Superior  Consolidated  Iron 


AMALGAMATION  OF  CORPORATIONS  37 

Mines,  and  other  corporations  that,  under  the  rule  of 
excluding  purely  local  corporations  or  those  that  are 
in  substantial  competition,  scarcely  belong  in  the 
enumeration.  Even  as  it  stands,  however,  the  list  is 
quite  formidable  as  respects  the  amount  of  capital  in- 
volved. 

Figures  from  an    In   the    World  Almanac  for    I9<»,  Byron 
Anti-Trust  W.  Holt  gives  what  he  denominates  a  list 

of  200  leading  corporate  trusts,  corrected 
to  November  30,  1899.  In  this  list  he  excludes  what 
he  calls  natural  monopolies  along  with  consolidations 
and  price  and  rate-fixing  agreements.  In  order  to 
make  up  his  list  of  200,  he  includes  coal  and  iron,  cop- 
per, local  ice,  steamboat,  telephone,  local  brewing, 
local  milk,  automobile,  telegraph  and  other  com- 
panies that  represent  either  local  interests,  independ- 
ent business  enterprises,  or  properties  that  own  and 
operate  patents,  and  even  tremendously  competing 
companies  like  iron  and  steel  concerns.  The  only 
standard  of  measurement  in  this  instance  seems  to  be 
that  the  corporation  shall  have  been  a  combination  of 
two  or  more  concerns,  and  sometimes  not  even  that 
condition  is  rigidly  adhered  to. 

The  capitalization  of  these  200  trusts  is  stated 
to  be  the  amount  of  stock  issued  when  known  or 
the  amount  authorized  when  the  amount  issued  is 
not  known.  A  total  is  figured  out  of  common  stock 
over  $2,200,000,000  and  of  preferred  stock  something 
over  $1,200,000,000,  the  grand  total  being  nearly 
$3,500,000,000.  The  statement  is  further  made  that 
"only  the  more  important  perfect  trusts  are  contained 
in  this  list;  over  five  hundred  are  known  to  exist." 
In  addition,  Mr.  Holt  gives  a  list  of  what  he  calls 


38  THE    OTHER    SIDE 

"sixty-five  principal  unincorporated  trusts,"  which,  he 
explains,  are  "price  and  rate-fixing  agreements,  profit- 
sharing  pools,  selling  or  buying  agencies,  product- 
restricting  agreements,  and  so  on."  These,  it  is  ex- 
plained, exist  in  nearly  every  industry.  The  estimated 
capital  of  these  concerns  is  placed  at  a  little  more  than 
$1,100,000,000. 

In  The  Manual  of  Statistics  for  1900,  de- 
Industrials  in  the  tailed  figures  are  presented  concerning 
Stock  Markets  ...  .  ,  . 

those  corporations  known  in  financial  cir- 
cles as  industrials.  The  list  comprises  all  manufactur- 
ing, commercial,  electrical,  gas,  mining,  land,  coal, 
iron  and  other  miscellaneous  corporations  whose  se- 
curities are  known  in  the  leading  stock  markets,  and 
full  data  are  presented  regarding  their  capital,  earnings 
and  organization.  In  this  work  the  statements  of 
nearly  four  hundred  corporations  appear.  Of  these 
there  are  express,  copper,  mining,  banknote,  tele- 
graph and  cable,  telephone,  gas,  coal,  ice,  electric  light 
and  miscellaneous  corporations,  to  the  number  of  over 
two  hundred,  leaving  some  one  hundred  and  seventy 
that  can  be  fairly  recognized  as  large  or  amalgamated 
corporations  engaged  in  productive  industrial  enter- 
prises. 

A  very  considerable  number  of  these  concerns  are  of 
local  character,  are  competitive,  are  incorporations  of 
independent  business  plants,  or  companies  that  exist 
for  the  ownership  of  patents  and  for  doing  business 
thereunder.  None  of  these  can  fairly  be  considered  as 
trusts,  in  the  general  apprehension  of  the  term  mean- 
ing combinations  of  capital  monopolizing  or  trying  to 
monopolize  specific  industries. 
The  total  capitalization  of  these  corporations 


AMALGAMATION  OF  CORPORATIONS  39 

amounts  to  a  little  more  than  $2,500,000,000.  Fur- 
thermore, in  this  gross  amount  of  capitalization  is  in- 
cluded that  of  twenty-four  iron  and  steel  companies, 
whose  capitalization  alone  amounts  to  over  $500,000,- 
ooo.  Some  of  these  are  in  nowise  trusts,  even  in  the 
most  elastic  sense  of  the  word.  They  are  simply  large 
incorporations  of  independent  business  enterprises. 
They  do  not  represent  consolidations  of  two  or  more 
previously  independent  and  competing  concerns.  Fur- 
thermore, all  of  them  represent  competitive  business 
in  the  fullest  sense  of  the  word,  for  competition  be- 
tween them  exists,  as  it  could  not  possibly  exist  be- 
tween any  number  of  companies  of  smaller  size. 

Most  Reliable  and  The   fi^res   in   The    Manual   of   Statistics 
Valuable  are,  beyond  all  question,  the  most  reliable 

presentation  of  facts  in  relation  to  the  field 
that  they  cover.  They  have  been  gathered  with  in- 
finite patience  from  official  sources  and  have  been  veri- 
fied in  all  cases  by  the  managers  of  the  companies  rep- 
resented. They  cover  practically  nearly  all  the  cor- 
porations that  have  been  listed  in  the  leading  stock 
markets. 

That  large  corporations  of  amalgamated  capital 
exist  outside  of  those  that  are  dealt  in  on  the  stock 
exchanges  is  undoubtedly  true.  Nevertheless,  it  is 
quite  as  true  that  by  far  the  greater  portion  of  those 
that  are  of  sufficient  size  or  influence  to  command  at- 
tention in  the  financial  world,  or  to  exercise  prepon- 
derating influence  in  any  branch  of  industry,  are  to  be 
found  on  the  markets.  Much  of  the  amalgamated  capi- 
tal that  has  been  arraigned  as  dangerous  trusts  and 
monopolies  has  been  organized  for  the  two-fold  pur- 
pose of  prosecuting  industry  and  for  financing  stock 


40  THE    OTHER    SIDE 

and  bonds  in  order  to  enlist  more  capital.   Naturally, 
then,  such  enterprises  must  seek  the  stock  exchanges. 

ft  is  fair  to  conclude  that  other  so-called 
Possibility  of  , 

Erroneous  Con-    trusts  or  combinations  that  do  not  make 


elusions  thejr  appearance  in  financial  circles  have 

been,  broadly  speaking,  organized  solely  for  indus- 
trial purposes  and  not  for  financing.  They  are  merely 
old-fashioned  corporations  of  greater  or  less  size,  such 
as  we  have  had  for  generations.  They  are  doing  busi- 
ness in  competitive  fashion,  but  under  the  new  system 
of  economy  in  production  and  administration  that  now 
predominates  in  the  business  world. 

If  you  seek  to  analyze  the  statistics  presented  from 
various  sources,  you  will  find  that  the  movement, 
when  brought  down  to  the  hard  matter-of-fact  test  of 
dollars  and  cents,  amounts  to  much  less  than  is  often 
declared  by  careless  observers.  A  compilation  of 
newspaper  reports  of  new  corporations  with  large 
capital,  or  even  of  official  figures,  appears  imposing. 
It  is  not  always  certain,  however,  that  they  represent 
anything  more  than  the  mere  charter  of  incorpora- 
tion. Estimates  and  speculations  based  upon  such  in- 
formation are,  to  say  the  least,  of  uncertain  value. 
They  lead  to  wrong  conclusions  concerning  a  subject 
that  is  of  itself  sufficiently  momentous,  even  when  con- 
sidered conservatively  and  sensibly. 
Exaggerated  ^  comPutati°n  made  for  the  year  ending 
Figures  of  Cen.  February  28,  1899,  placed  the  approximate 
tralized  Capital  amount  of  the  new  capitalization  in  the 
United  States  at  $5,200,000,000  with  $715,000,000 
funded  debt  against  new  organizations  with  $3,290,- 
000,000  stock  and  $379,000,000  in  bonds  for  the  year 
ending  the  same  date  in  1898.  According  to  the  cen- 


AMALGAMATION  OF  CORPORATIONS  41 

sus  statistics  of  1890,  the  aggregate  capital  invested  in 
manufacturing  and  mechanical  industries  in  the  whole 
of  the  United  States  was  less  than  $6,530,000,000. 

Starting  with  the  latter  figures  as  a  substantial  basis, 
the  absurdity  of  considering  that  the  enormous  figures 
attributed  to  the  new  corporations  represent  tangible 
capital  is  clearly  apparent.  They  are  practically  worth- 
less in  estimating  the  financial  magnitude  of  the  trust 
movement.  It  is,  of  course,  utterly  impossible  that, 
with  the  entire  capital  invested  in  manufacturing  and 
mechanical  industries  in  the  United  States  being  less 
than  $6,500,000,000  in  1890,  in  the  two  years  of  1898 
and  1899  the  movement  for  the  amalgamation  of  capi- 
tal into  trusts  could  have  absorbed  over  $8,000,000,000 
of  capital.  No  one  will  pretend  for  a  moment  that  all 
industries  have  been  gathered  into  the  net  of  the  trust, 
and  we  have  not  yet  reached  the  point,  even  in  financial 
exploitation,  where  the  part  can  6e  infinitely  greater 
than  the  whole. 

Public  excitement  has  surely  tended  to  ex- 
agSerate  the  amount  of  actual  capital  ab- 
sorbed by  the  trusts  and  the  extent  to 
which  it  is  dominating  the  industry  of  the  country. 
Nevertheless,  these  organizations,  despite  adverse 
legislation  and  severely  critical  opinion,  have  con- 
tinued to  grow  in  number,  size  and  influence.  During 
the  years  of  1897,  1898  and  1899  the  movement  toward 
the  concentration  of  capital  in  all  branches  of  indus- 
try showed  a  conspicuous  development. 

The  trust  idea  seemed  to  flourish  and  grow  stronger 
on  opposition.  The  more  it  was  considered  and  the 
greater  publicity  that  was  given  to  it,  the  more  were 
its  merits  emphasized.  Manufacturers  and  other  busi- 


48  THE    OTHER    SIDE 

ness  men,  who  heretofore  had  given  little  attention  to 
the  matter,  were  led  to  investigate.  The  more  they 
learned  the  more  they  became  interested  in  it  as  prom- 
ising a  saving  way  out  of  the  many  complexities  of 
business  that  surrounded  them.  The  rush  of  corpora- 
tions of  all  kinds  to  be  absorbed  by  larger  corpora- 
tions continued  with  little  interruption  down  to  the 
closing  months  of  1899.  At  that  time  there  appeared 
to  be  indications  of  cessation  in  the  movement.  Some 
careful  observers  came  to  the  conclusion  that  for  the 
present,  at  least,  amalgamation  of  capital  had  nearly 
attained  its  limits  under  existing  conditions. 
Industrial  Devel.  Undoubtedly,  however,  the  end  is  more  ap- 
opment  Must  Pol-  parent  than  real.  The  constructive  period 
low  Financing  may  haye  nearly  passed  The  energies  of 

capitalists  have,  thus  far,  been  largely  devoted  to  reor- 
ganization. They  have  put  themselves  in  line  with 
this  great  economic  revolution,  have  cleared  their 
houses,  as  it  were,  and  are  practically  at  an  end  of  the 
preparative  stage.  That  is  not  by  any  means,  how- 
ever, an  end  of  the  trust  movement.  In  fact,  it  is  only 
the  beginning. 

There  has  been  something  of  sensationalism  in  the 
rapidity  with  which  business  has  hastened  to  array  it- 
self under  the  new  order.  Hereafter,  however,  we  are 
likely  to  see  much  less  of  that,  and  more  of  a  settling 
down  into  serious  application  to  profit  to  the  fullest 
extent  by  whatever  of  industrial  advantage  may  attach 
to  the  changed  conditions  of  doing  business.  The  in- 
dustrial strength  of  consolidated  capital  has  as  yet 
scarcely  made  itself  known,  save  in  isolated  cases.  The 
future  alone  can  determine  how  the  problems  that  now 
confront  it  will  be  worked  out. 


ADMINISTRATION  AND  PRODUCTION 

ECONOMICAL  RESULTS  ATTAINED  BY  MEANS  OF  THE  CONCEN- 
TRATION OF  INDUSTRIAL  FORCES— LESSENED  COST  OF  MANU- 
FACTURING AND  OF  SELLING— BETTER  GOODS  AND  LOWER 
PRICES  FOR  THE  CONSUMER 

The  only  way  by  which  aggregated  capital 

Capital  Must        can  justj[fy  itself  is  by  demonstrating  its  use- 
Serve  the  Public    ,  ,   J         *  .  ,.  J 

fulness  to  the  public.    Capital  is  not  unfairly 

regarded  as  innately  selfish.  In  its  manipulation  its 
possessors  have  no  other  purpose  of  mind,  save  to 
make  it  minister  to  their  own  material  advantage.  Any 
thought  of  serving  the  public  is  entirely  foreign  to  their 
contemplation. 

Nevertheless,  public  utility  is  the  one  thing  that  is 
of  paramount  importance.  More  than  that,  the  very 
existence  of  capital  and  the  only  excuse  for  the  exer- 
cise of  its  powers  rest  upon  its  ability  and  willingness 
to  serve  the  public.  That  is  an  undebatable  proposi- 
tion, whether  we  consider  invested  wealth  in  its  sim- 
plest form  of  hundreds  and  thousands  of  dollars,  or  in 
its  more  complex  aggregations  of  millions. 

This  is  not  the  place  to  enter  upon  an  extended  con- 
sideration of  the  thousands  of  miscellaneous  activities, 
large  and  small,  in  which  capital  is  engaged.  It  is 
quite  sufficient  for  the  present  purpose  to  point  out 
that  the  fundamental  law  of  satisfaction  to  the  con- 
sumer simply  involves  excellence  and  cheapness  of 
product,  reliability  and  stability  of  service,  and  fair  re- 
turns to  labor.  The  public  is  primarily  and  directly  in- 

43 


44  THE    OTHER    SIDE 

tcrested  only  in  the  qualities  of  excellence  and  cheap- 
ness. These  two  things  it  emphatically  demands,'  and 
only  the  capital  that  guarantees  them  can  hope 
for  successful  existence.  Upon  no  other  premise  can 
it  for  a  moment  stand. 

The  consuming  public  demands    and    will 
and'the  PubUc  in  have  the  highest  degree  of  productive  effi- 
Partnership         ciency.    It  will  insist  that  capital  shall  be 
so  organized  that  labor  can  be  kept  steadily  employed 
at  fair  wages,  that  the  home  market   can  be   sup- 
plied  with    its   products    at    reasonable    prices,    and 
that  foreign  capital  can  be  successfully  competed  with 
in  the  markets  of  the  world.    These  three  things  are  for 
the  general  welfare  and  are  the  important  share  that 
the  public  has  in  all  industrial  enterprise. 

Capital  cannot  stand  alone  by  itself.  It  is  in  a  part- 
nership, the  other  partners  being  the  wage-earners  and 
the  consumers.  It  would  be  difficult  for  any  one  of  the 
three  to  get  along  without  the  others.  On  the  whole, 
however,  capital  could  be  more  easily  dispensed  with 
than  labor  or  consumption.  Even  without  capital  labor 
might  find  something  to  do  by  itself  and  consumption 
could  also  meet  at  least  its  primitive  needs  unaided. 
Capital,  however,  cannot  subsist  for  a  single  day  ex- 
cept it  is  upheld  by  labor  and  consumption. 

That  is  one  of  the  reasons  why  capital  by  itself  has 
gradually  decreased  in  power  and  in  value,  while  the 
other  two  partners  in  the  combination  have  developed 
their  strength  and  their  influence.  There  never  was  a 
time  in  the  history  of  the  world  when  money  was  as 
cheap  as  it  is  now,  or  when  labor  could  procure  more 
of  the  products  of  capital  with  its  earnings,  or  when  the 
demands  of  purchasers  were  more  fully  or  more 


ADMINISTRATION    AND    PRODUCTION  45 

cheaply  met.  Instead  of  capital  being  the  master,  it  is 
the  slave.  It  is  wandering  about  the  world,  not  seek- 
ing whom  it  may  devour,  but  plaintively  begging  for 
an  opportunity  to  earn  its  scant  three,  four  or  five  per 
cent,  interest. 

In  this  competitive  struggle  on  the  part  of 
A  Philosophic  capital  to  serve  mankind,  economy  of  pro- 
duction and  administration  have  been  the 
most  important  factors  in  determining  its  ability  to  re- 
main in  the  field.  Ralph  Waldo  Emerson  said: 
"Wealth  is  the  application  of  mind  to  nature ;  and  the 
art  of  getting  rich  consists,  not  in  industry,  much  less 
in  saving,  but  in  better  order,  in  timeliness,  in  being  at 
the  right  spot."  That  is  the  essence  of  economic  phi- 
losophy. It  is  the  rule  of  conduct  by  which  every  busi- 
ness organization  must  ultimately  stand  or  fall. 

The  history  of  the  great  combinations  of  capital  have 
fully  demonstrated  the  truth  of  that  philosophic  utter- 
ance. Those  that  have  attempted  to  achieve  success 
merely  by  advancing  prices,  have  invited  their  own 
destruction  and  have  fallen,  rarely  to  rise  again.  Those 
that  have  based  their  hopes  upon  better  order  and 
timeliness,  that  have  aimed  for  economy  in  production 
and  in  administration,  that  have  endeavored  to  recover 
vanished  profits  through  savings  and  through  the  ad- 
vantage that  larger  means  gives  them  in  reducing  ex- 
penses, have  been  the  ones  that  have  achieved  success; 
or,  if  sometimes,  through  untoward  circumstances 
they  may  have  missed  it,  they  have  at  least  merited 
success* 

Imperative  Con.    X.n  anv  line  of  industl7  ^  is  possible  for  a 
ditionsof  time  to  do  a  fairly  successful  business  on 

Business  Success  uneconomic  principles.  Before  competition 


has  arisen  or  the  public  has  awakened  to  a  full  realiza- 
tion of  its  needs  and  its  rights  in  the  matter,  he  who  at- 
tempts to  supply  current  demands  may  not  be  called 
upon  to  exercise  the  carefulness  of  supervision  that 
later  on  will  be  exacted  from  him. 

The  time  is  not  long  in  coming,  however,  when  he 
is  compelled  to  be  on  the  alert.  Competition  sets  in, 
and  that  must  be  an  end  to  wasteful  methods  of  pro- 
duction and  carelessness  in  business  details.  Ulti- 
mately there  is  only  one  rule  of  procedure  by  which 
enduring  and  profitable  business  existence  can  be  as- 
sured, and  that  is  by  productive  and  administrative 
economy  at  every  point.  To  that  must  every  industrial 
enterprise  sooner  or  later  come,  whether  it  be  the  small 
shop  with  two  or  three  employees,  or  the  large  manu- 
facturing establishment  involving  millions  of  dollars. 

Economic  Effi-  ^  1S  ^s  strug"g^e  °f  modern  competition 
ciency  Demanded  and  the  ever-growing  demand  for  economic 
>  Capital  an(j  administrative  economy  constantly 

forcing  itself  upon  the  attention  of  those  engaged  in 
supplying  the  world's  needs  that  has  been  one  of  the 
inciting  causes  of  modern  centralization  of  capital. 
Only  by  the  utilization  of  capital  massed  in  compact 
form  can  the  greatest  economy  of  production  be  se- 
cured. 

Hand  labor  always  has  been  and  always  will  be  the 
most  costly  form  of  production.  The  hand-made  ar- 
ticle fabricated  by  the  single  individual,  or,  at  best,  by 
not  more  than  two  or  three  individuals  working  to- 
gether, is  relatively  expensive.  Machinery,  giving 
employment  to  groups  of  workingmen,  under  the  di- 
rection of  large  capital,  has  resulted  in  a  vast  economy 
in  methods  of  production.  Capital  has  been  the  con- 


ADMINISTRATION    AND    PRODUCTION  47 

trolling  factor  in  bringing  about  this  result,  and  the 
greater  the  amount  of  capital  interested  in  any  par- 
ticular enterprise,  up  to  the  point  of  fully  meeting  its 
needs,  the  greater  has  been  the  resultant  economy 
therein. 

Capital,  even  in  small  quantities,  has  abundantly 
demonstrated  its  economical  efficiency  in  a  thousand 
different  ways.  Where  it  is  most  concentrated  it  has 
invariably  proved  most  effective,  other  things  being 
equal.  The  enormous  modern  manufacturing  estab- 
lishments that  have  done  so  much  for  mankind  during 
the  present  century  would  have  been  impossible  save 
through  great  aggregations  of  capital.  It  has  only 
been  by  the  operation  of  these  instrumentalities  that 
economical  methods  of  production,  lower  prices, 
higher  wages  and  an  increased  power  of  consumption 
on  the  part  of  the  public  have  been  developed. 

...   .  r  ,  Industrial    history    abounds    in    examples 

Wastefulness  in  ' 

Early  Railroad  showing  how  commercial  organization  has 
Management  operated  to  bring  about  a  reduction  in  the 
cost  of  production  and  a  consequent  lowering  of  prices. 
Men  are  still  active  in  life  who  have  had  personal  cog- 
nizance of  this  in  the  case  of  the  railroads  of  the  United 
States. 

In  the  early  history  of  railroad  construction  the 
country  was  gradually  traversed  by  innumerable  small 
and  unrelated  traffic  lines.  Freight  and  passenger 
tariffs  were  maintained  independently  and  at  high  rates, 
and  travel  and  transportation  were  carried  on  under 
surroundings  most  discouraging  and  at  high  cost.  The 
condition  of  things  that  then  prevailed  became  well 
nigh  intolerable  both  to  the  business  and  the  traveling 
public,  and  the  high  rates  were  a  burden  upon  the  en- 
tire community. 


48  THE    OTHER    SIDE 

When  the  numerous  railroad  lines  in  different  parts 
of  the  country,  and  especially  those  that  extended  from 
the  central  west  to  the  seaboard,  began  to  consolidate, 
many  men  honestly  believed  that  this  was  the  begin- 
ning of  such  a  centralization  of  capital  as  would  even- 
tually bring  ruin  to  important  public  interests  and 
great  private  industries.  Long,  however,  before  the 
work  of  combination  was  fully  accomplished  it  had 
proved  the  foolishness  of  the  direful  predictions  that 
had  been  made  concerning  it,  and  had  fully  demon- 
strated its  usefulness  to  the  public.  Through  the  con- 
solidation of  many  independent  roads  into  a  few  great 
trunk  lines  there  have  come  lower  passenger  fares, 
cheaper  freight  rates,  improved  roadbeds,  better  roll- 
ing stock,  more  frequent,  faster  and  more  luxuriant 
trains  and  safer  traveling.  With  such  regularity  have 
these  changes  been  brought  about  they  would  seem 
to  have  resulted  from  the  operation  of  some  all-power- 
ful law. 

Lessons  ^s  nas  a'reacty  been  declared  on  a  previous 

Drawn  from         page,  it  is  not  the  purpose  of  this  volume  to 
Railroad  History    discuss   thg  history   Q{   capjtal   inyested   jn 

railroads  and  other  so-called  natural  monopolies.  As 
an  example,  however,  of  the  workings  of  consolidated 
capital,  the  experience  of  railroads  and  like  corpora- 
tions has  an  instructive  value.  Statistics  concerning 
them  are  more  available  than  those  pertaining  to  the 
later  industrial  organizations  that  have  not  been  in 
existence  long  enough  to  fully  demonstrate  their  scope 
and  effects.  It  may  be  well,  then,  to  study  the  figures 
i  elating  to  the  operation  of  capital  thus  invested,  as 
showing  what  results  may  be  surely  expected  from  its 
operation  whenever  consolidated,  for  whatever  pur- 
pose and  howsoever  used. 


ADMINISTRATION    AND    PRODUCTION  49 

The  testimony  of  those  who  have  given  the  most  at- 
tention to  railroad  history  in  the  United  States,  as  well 
as  of  those  who  have  had  practical  experience  in  man- 
aging railroads  or  in  dealing  with  them,  is  all  to  one  ef- 
fect, and  that  is  that  it  is  only  by  consolidation  that  the 
roads  have  reached  that  point  of  excellence,  as  regards 
improved  public  service,  that  characterizes  them  at  the 
end  of  the  century. 

It  was  not  until  after  the  Civil  War  that  the 
Some  Results 

from  Railroad  consolidation  of  railroads  into  large  systems 
Consolidation  began  to  make  itsdf  fdt  Since  then  the 

process  of  amalgamation  has  gone  steadily  forward, 
until  now  the  transportation  of  the  country  is  practi- 
cally in  the  hands  of  a  few  great  trunk  lines  that  have 
either  absorbed  or  have  attained  direct  or  indirect  con- 
trol of  hundreds  of  formerly  competing  independent 
roads. 

Figures  have  been  compiled  by  the  United  States 
Bureau  of  Statistics  relating  to  the  changes  in  the  rates 
of  charge  for  railway  and  other  transportation  services. 
They  show  that  during  the  period  from  1867  to  1896 
there  was  a  marked  decrease  in  the  average  revenue 
per  ton  and  the  average  rate  per  ton  per  mile.  In 
1886,  the  average  revenue  per  ton  was  $2.06,  and  in 
1896  it  was  $1.56,  showing  a  decrease  of  24.27  per  cent, 
in  ten  years.  In  1867  the  rate  per  ton  per  mile  was 
1.925  cents.  By  1886  this  had  been  reduced  to  1.160 
cents.  At  the  end  of  the  ensuing  ten  years  the  rate 
had  been  reduced  to  .745  cents,  showing  a  decrease  of 
35.78  per  cent. 

L  w  Rates  ^^e  averal?e  Per  passenger  did  not  show 
of  Travel  and  Im-  as  proportionate  a  decrease.  In  1886  the 
proved  Facilities  average  fare  per  passenger  was  41.39  cents, 


CO  THE   OTHER   SIDE 

and  in  1896  the  average  fare  was  34.30  cents,  showing 
a  decrease  of  17.13  per  cent.  In  1886  the  average  rate 
per  passenger  per  mile  was  2.208  cents,  and  in  1896 
the  rate  was  1.979  cents,  showing  a  decrease  of  10.37 
per  cent. 

At  the  same  time  there  has  been  improvement  in 
accommodations,  speed  and  comfort.  An  account  of 
traveling  in  the  United  States  in  the  early  sixties  seems 
almost  like  a  chapter  from  the  history  of  the  dark  ages. 
To-day  no  one  would  be  willing  to  contemplate  for  a 
single  moment  going  without  sleeping  cars,  parlor 
cars  or  dining  cars,  without  through  connections  and 
subject  to  repeated  delays  and  constant  changes,  in- 
cluding the  rechecking  of  baggage  and  the  purchase 
of  tickets  at  the  end  of  each  short  stretch  of  travel  on 
transferring  to  other  railroads. 

Those  were  the  conditions  of  travel  in  the  period 
immediately  following  the  Civil  War,  and  were  the  ac- 
companiment of  high  cost.  Along  with  the  great  im- 
provements in  these  particulars  came  a  steady  and 
large  decrease  in  the  cost  of  traveling.  All  these  mani- 
fold advantages  have  been  brought  about  principally 
through  the  concentration  of  capital  and  the  consoli- 
dation of  previously  competing  concerns  under  one 
management.  Railroad  history  in  the  United  States 
fails  to  show  a  single  instance  where  consolidation  has 
not  in  the  end  thus  resulted. 

Result  of  Consoli.  That  which  has  become  part  of  the  history 
dation  in  Produc-  of  the  great  railroads  of  the  United  States 
tive  Industries  has  attached  itself  with  like  persistency  to 

the  nineteenth  century  productive  industrial  organiza- 
tions. With  the  increase  in  general  prosperity,  the  in- 
vention of  machinery  and  the  improved  methods  of 


ADMINISTRATION    AND    PRODUCTION  51 

doing  business,  prices  for  products  of  all  kinds  have 
invariably  tended  downward.  Trusts  have  in  nowise 
interfered  with  this.  On  the  contrary,  whether  they 
have  been  so  disposed  or  not,  they  have  found  them- 
selves compelled  to  accelerate  the  downward  move- 
ment as  a  condition  precedent  of  a  successful  continu- 
ance in  business. 

This  is  no  mere  matter  of  theory;  it  has  been  again 
and  again  practically  shown  in  all  the  great  industries. 
Market  prices  of  all  staples  are  lower  than  they  were, 
fifty,  forty,  twenty-five,  twenty,  fifteen,  or  ten  years 
ago.  They  have  not  gone  steadily  down.  There  have 
been  fluctuations,  sometimes  very  extreme.  Now  and 
then  prices  have  gone  up  like  skyrockets  or  have  un- 
duly fallen  through  artificial  causes.  But  every  such 
exaggerated  inflation  or  depression  has  been  promptly 
followed  by  a  movement  in  the  opposite  direction.  On 
the  whole,  when  prices  of  any  particular  article  have 
once  got  soundly  down  to  reasonably  low  figures,  they 
have  never  been  materially  increased.  That  is  a  step 
in  progress  that  history  shows  never  can  be  retraced. 
Once  we  paid  fifteen  cents  a  pound  for  granulated 
sugar,  but  that  time  can  never  come  again. 
Combinations  of  Cotton  manufacturing  was  the  earliest  in- 
Capital  in  Textile  dustry  to  come  under  the  influence  of  the 
Manufacturing  centralization  of  capital.  In  that  branch  of 
activity  was  the  beginning  of  the  factory  system  and 
the  foundation  of  all  modern  manufacturing.  Statis- 
tics concerning  that  industry  date  back  further  than 
those  pertaining  to  any  other  employment.  Covering 
in  this  country  a  period  of  three-quarters  of  a  century 
they  have  fully  demonstrated  how  the  use  of  large  capi- 
tal has  resulted  in  notable  economy  and  in  the  general 
enlargement  and  improvement  of  business. 


62  THE    OTHER    SIDE 

In  the  United  States  census  for  1880  figures  were 
given  concerning  the  cotton  industry  as  it  was  in  this 
country  in  1830  and  fifty  years  later.  In  1830  the  capi- 
tal invested  in  the  cotton  mills  of  the  United  States 
amounted  to  $40,612,984.  In  1880  this  had  increased 
to  $208,280,346.  The  number  of  establishments  had 
not  increased  in  like  proportion.  On  the  contrary, 
they  had  decreased  from  80 1  in  1830  to  756  in  1880, 
thus  showing  a  very  considerable  concentration  of 
capital  in  a  lesser  number  of  establishments. 

This  increase  of  capital  and  its  concentration 
brought  about  also  a  notable  development  in  the  in- 
dustry and  conspicuous  economies.  The  number  of 
pounds  of  cloth  produced  in  1830  were  59,514,926, 
while  in  1880,  607,264,241  pounds  were  produced.  In 
1830  the  persons  employed  were  62,208,  and  in  1880, 
172,544.  The  spindles  in  use  were  1,246,703  in  1830, 
and  10,653,435  in  1880.  In  1830  the  average  amount  of 
capital  to  each  establishment  was  $50,702,  and  in  1880 
$275,503.  Comparing  the  pounds  of  cloth  produced 
with  the  amount  of  capital  invested,  we  find  in  1830  a 
ratio  of  1.4  pounds  to  $i,  and  in  1880  a  ratio  of  2.4 
pounds  to  $i.  In  1830  there  were  $652.85  invested  to 
every  person  employed,  and  in  1880  $1,207.17  to  every 
such  person.  In  1830  there  were  twenty-two  spindles 
to  every  employee  and  in  1880  sixty-two.  In  1830 
there  were  950.7  pounds  of  cloth  produced  to  every 
employee,  and  in  1880,  3,519.5  pounds  to  every  one. 
The  annual  consumption  of  pounds  of  cotton  cloth  per 
capita  was  5.90  in  1830,  and  in  1880,  13.91.  The  price 
of  cotton  cloth  per  yard  in  1830  was  seventeen  cents, 
and  in  1880  seven  cents. 

These  figures  demonstrate  several  things.     During 


ADMINISTRATION    AND    PRODUCTION  53 

Reduced  Cost  of  the  period  that  they  cover  the  aggregate 
,ProdjCr'ont  ^°'"  capital  invested  increased  quite  500  per 
tion  cent.,  while  the  number  of  establishments 

decreased  nearly  five  per  cent.,  showing  an  enormous 
centralization  of  capital.  This  combination  of  capital 
brought  it  about  that  while  the  capital  invested  per 
spindle  was  one-third  less,  the  number  of  spindles 
operated  by  each  worker  was  nearly  three  times  as 
large  and  the  product  per  spindle  one-fourth  greater. 
It  required  nearly  double  the  amount  of  capital  for 
each  person  employed  in  1880  that  it  did  in  1830,  and 
at  the  same  time  wages  were  more  than  doubled,  being 
increased  from  $2.55  in  1830  to  $5.40  per  week  in  1880. 
The  product  per  dollar  invested  was  twice  as  large, 
while  the  price  of  cotton  cloth  showed  a  falling  off  of 
nearly  sixty  per  cent,  and  the  consumption  per  capita 
of  population  an  increase  of  more  than  100  per  cent. 

.  ,.,  Let  us  examine  the  history  of  the  Standard 

A  Chapter  from  * 

Productive  Indus-  Oil  Company,  as  showing  how  consolida- 
trial  History  tjon  Qf  capjtal  nas  resulted  in  economy  of 

production,  improvement  of  service  to  the  public,  and 
lessened  prices.  The  story  is,  in  a  broad,  general  way, 
a  repetition  of  that  of  the  railroads;  the  same  economic 
laws  have  prevailed  in  both  instances.  Probably  no 
other  industrial  organization  in  the  United  States  has 
ever  been  more  under  the  ban  of  adverse  public  senti- 
ment than  the  Standard  Oil  Company.  It  was  the  first 
great  trust  to  make  an  appearance,  is  one  of  the  largest 
industrial  organizations  in  the  world,  and  comes  more 
nearly  to  being  a  monopoly  than  any  other  corporation 
of  its  kind  now  in  existence.  Whether  through  its 
operations  it  has  proved  to  be  to  the  public  advantage 
or  disadvantage  is  still  a  popular  subject  of  animated 
debate. 


54  THE    OTHER    SIDE 

If  it  is  possible  for  aggregated  capital  controlling 
industrial  organization  to  attain  to  monopolistic  power 
and  to  maintain  its  special  selfish  advantages  in  oppo- 
sition to  the  wishes  and  interests  of  the  public  and  in 
defiance  of  all  economic  forces,  the  Standard  Oil  Com- 
pany could  certainly  be  expected  to  accomplish  this 
result,  since  it  has  existed  under  conditions  most  favor- 
able to  itself. 

Several  thin^S  are  dearly  aPParent  in  rela' 


The  Development 

of  a  Great  tion  to  this  company.     During  the  nearly 

Industry  third  of  a  century  of  its  existence,  previous 

to  1900,  it  developed  an  industry  that,  down  to  1870 
had  amounted  to  comparatively  little,  into  an  annual 
volume  of  more  than  $150,000,000.  Of  that  vast 
amount  the  shareholders  retain  about  $25,000,000, 
while  the  people  of  the  country  have  the  advantage  of 
the  remaining  $125,000,000.  Under  the  business  op- 
erations of  the  company  the  cost  of  light  has  been 
greatly  lessened  and  a  hundred  million  dollars  are  an- 
nually paid  out  for  oil  and  labor.  The  Standard  Oil 
Company  has  added,  undoubtedly,  more  than  $1,000,- 
000,000  to  the  wealth  of  the  country,  and  contributes 
each  year  $60,000,000  to  the  credit  of  our  export  trade. 
That  these  results  could  have  been  attained  or  even 
distantly  approximated  by  the  operations  of  hundreds 
of  independent  oil  producers  and  refiners,  is  quite  be- 
yond comprehension.  Only  the  combination  of  capi- 
tal, as  it  has  existed  in  the  case  of  this  company,  could 
have  been  thus  successful. 

Some  Methods      Before  the  organization  of  the  Standard  Oil 

of  Economy  in    Company  in  1872,  oil  was  transported  from 

the  wells  to  the  market  by  the  railroads  in 

small  quantities  in  barrels  and  tanks.    Gradually  these 


ADMINISTRATION    AND    PRODUCTION  55 

methods  of  transportation  were  succeeded  by  great 
pipe  lines,  that,  extending  underground,  convey  the 
oil  directly,  easily  and  cheaply  from  the  oil  fields  to 
the  leading  cities  of  the  country.  It  is  said  that  on  the 
cost  of  transportation  alone,  there  has  been  a  saving  of 
over  sixty-six  per  cent.  In  the  cost  of  barrels,  which 
the  company  now  manufactures  for  itself,  there  has 
been  a  reduction  in  cost  of  about  forty-seven  per  cent., 
and  in  the  manufacture  of  tin  cans  a  saving  of  fifty  per 
cent.  So  at  all  points  there  has  been  a  very  great  reduc- 
tion in  the  cost  of  production,  brought  about  principally 
by  the  ability  of  the  company,  through  its  large  capi- 
talization and  efficient  management,  to  transact  busi- 
ness in  a  big  way,  to  make  great  improvements,  to 
multiply  its  facilities  and  to  take  advantage  of  all  the 
many  economies  arising  from  extensive  purchases  and 
sales. 

Reduction  of         ^  IS  ^T  tO  3S^  ^OW  mucn  tne  public  has 
Price  profited  by  the  operations  of  the  company. 

to  Consumers  If>  through  its  introduction  of  economical 
methods,  it  has  been  able  to  reduce  the  cost  of  pro- 
duction, that  will  avail  little  in  public  estimation  if  the 
profits  thus  secured  have  been  monopolized  solely  by 
itself.  Of  course  we  have  had  better  oil.  Once  petro- 
leum was  very  poor  and  dangerous  to  use.  Now  it  is 
a  perfectly  safe  illuminant.  More  than  that,  it  is 
brought  to  the  doors  of  even  the  poorest  people  in  the 
most  distant  settlements  of  the  country  at  prices  that 
are  reasonable. 

The  steady  fall  in  price  of  oil  has  been  one  of  the 
most  conspicuous  features  in  the  history  of  the  Stan- 
dard Oil  Company.  According  to  the  statistics  of  the 
New  York  Produce  Exchange  reports  and  the  New 


York  Chamber  of  Commerce  reports,  it  appears  that  in 
1871  the  oil  shipments  from  the  wells  amounted  to 
5,667,891  barrels,  while  the  stock  of  crude  oil  on  hand 
was  568,858  barrels.  The  price  of  crude  oil  per  gallon 
at  the  wells  was  10.52  cents,  while  the  price  per  gallon 
of  refined  oil  for  export  was  24.24  cents. 

During  the  seven  years  following  1871  the  ship- 
ments and  the  stock  on  hand  largely  increased  until,  in 
1878,  the  former  were  13,750,090  barrels  and  the  latter 
4,307,590  barrels.  The  price  of  crude  oil  had  fallen 
until,  in  1878,  it  was  2.76  cents  per  gallon,  while  the 
price  of  refined  oil  for  export  was  10.87  cents.  In  1879 
the  first  pipe  line  was  laid,  and  thereby  the  amount  of 
shipments  and  the  stock  on  hand  were  still  further  in- 
creased year  by  year. 

Improved  Pro-  ^e  Pr*ce  °f  crude  oil  and  of  refined  oil  kept 
ductive  Methods  going  steadily  downward,  until  in  1881,  the 
and  Falling  Prices  that  the  Standard  Oil  Trust  was  organ- 

ized, the  price  for  the  former  was  2.30  cents  and  the 
latter  8.05  cents.  In  1887  the  amount  of  shipments  had 
arisen  to  26,627,191  gallons  and  the  stock  on  hand  to 
28,310,282  barrels.  The  price  of  crude  oil  was  1.59 
cents  and  the  price  of  refined  oil  6.75  cents.  From 
1871  to  1887  the  price  of  crude  oil  had  fallen  8.93  cents 
per  gallon,  and  the  price  of  refined  oil  17.49  cents.  That 
showed  a  net  fall  in  the  price  of  refined  oil  over  and 
above  that  of  the  crude  of  8.56  cents  per  gallon.  This 
reduction  in  price  was  due  exclusively  to  improved 
methods  introduced  into  the  various  processes  of  re- 
fining and  transporting  oil,  methods  that  were  only 
possible  through  the  employment  of  large  capital  such 
as  the  Standard  Oil  Company  has  possessed. 
After  1887  the  price  showed  a  generally  downward 


ADMINISTRATION    AND    PRODUCTION  57 

tendency,  although  with  occasional  higher  prices.  In 
1888,  1889  and  1890  it  was  fractionally  above  J 
cents  per  gallon;  in  1891  and  1892  it  was  a  little  above 

6  cents  per  gallon;   in    1893   and  1894   fractionally 
above  5  cents  per  gallon;  in  1895  and  1896  7  cents  and 

7  1-3  cents,  and  in  1897  and  1898  5.9  cents  and  5.7 
cents  respectively.     After  January,   1898,  there  was 
an  upward  tendency  in  the  price,  going  from  5.40  cents 
upon  that  date,  according  to  the  statistics  of  the  New 
York  market,  to  9.65  cents  in  December,  1899,  a  rise 
of  4.25  cents  per  gallon. 

Prices  of  Crude  In  January>  l898>  the  Price  of  crude  oil  was 
and  Refined  i-55  cents  per  gallon,  and  in  December, 
Oil  Compared  jg^  it  wag  3  gg  cents  The  difference  be_ 

tween  the  price  of  crude  oil  and  refined  oil  in  January, 
1898,  was  3.85  cents;  the  difference  in  December,  1899, 
was  5.77  cents.  This  showed  that  to  the  price  of  re- 
fined oil  has  been  added  not  only  the  advance  in  the 
cost  of  crude  oil,  but  1.92  cents  per  gallon  besides.  It 
has  been  clearly  pointed  out  that  this  additional  ad- 
vance was  more  than  eaten  up  by  the  increased  cost  of 
other  items  in  the  production  of  refined  oil.  During 
the  years  of  1898  and  1899  particularly  the  price  of 
nearly  everything  that  enters  into  manufacturing  and 
distribution  of  all  kinds  of  articles  showed  a  notable 
increase.  Machinery,  lumber,  chemicals,  labor,  freight, 
and  so  on,  advanced,  some  of  them  a  very  considerable 
per  cent.  The  price  of  refined  oil  did  not  advance 
more  than  proportionately,  or  in  excess  of  its  increased 
cost. 

A  Page  from  the  In  the  latter  Part  of  l899  tne  public  heard  a 
History  of  Paper  great  deal  about  the  grasping  paper  trust 
Manufacturing  and  the  sudden  increase  in  prices  of  the  par- 


68  THE    OTHER    SIDE 

ticular  goods  that  it  supplies  to  the  American  public. 
The  fact  that  there  was  a  slight  increase  in  prices  was 
naturally  seized  upon  by  superficial  observers  as  con- 
clusive evidence  that  the  combination  of  capital  in  this 
particular  instance  was  exercising  its  powers  unduly 
to  the  detriment  of  the  public. 

The  real  truth  is  that  owing  to  a  variety  of  causes 
the  paper  manufacturing  industry  became  very  de- 
pressed along  in  the  early  nineties.  An  abnormal 
competition  between  the  various  individual  mills,  as- 
sisted by  other  causes,  brought  the  market  price  of 
paper  down  to  ruinous  figures.  There  was  really  no 
profit  in  the  business  anywhere  and  many  mills  were 
running  at  a  loss.  It  is  certainly  not  fair,  either  in 
economics  or  in  politics,  to  take  such  a  condition  of 
things  as  a  standard  and  measure  the  Tightness  of  the 
future  conduct  of  a  business  by  the  manner  in  which 
it  does  or  does  not  adhere  to  those  precedents. 

Natural  Cause  for  The  rise  in  the  PricC  °f  P*?61"  during  the 
Higher  Prices  summer  of  1899,  when  ordinary  news  went 
in  Paper  Up  to  as  high  as  two  and  one-half  cents  and 

other  grades  similarly,  was  due  to  natural  causes.  It 
was  in  one  sense  a  recovery  from  the  stagnation  that 
had  prevailed  for  some  years  previous  and  which  con- 
dition was  impossible  of  permanent  continuance  with- 
out driving  into  bankruptcy  every  paper  mill  that 
should  attempt  to  do  business  upon  any  such  figures. 
Moreover,  there  was  an  increase  in  cost  of  nearly 
everything  that  entered  into  the  composition  of  paper, 
pulp,  chemicals,  rags,  and  so  on;  an  increased  cost  of 
all  kinds  of  machinery,  and  a  drought  such  as  had  not 
been  known  for  many  years  and  that  restricted  the 
output  of  the  mills  to  an  unprecedented  extent. 


ADMINISTRATION    AND    PRODUCTION  59 

It  is  with  figures  covering  periods  of  ten  or  twenty 
years  that  it  is  fair  to  make  comparisons.  Special  and 
temporary  causes  may  result  in  a  rise  or  decrease  in 
prices  for  a  year  or  two,  but  such  spasmodic  occur- 
rences are  of  little  importance  in  estimating  the  real 
effects  of  any  particular  movement  or  the  operations 
of  economic  laws.  Men  who  are  still  in  the  paper 
manufacturing  business  have  no  difficulty  in  remem- 
bering the  time  when  they  sold  news  paper  for  fifteen 
or  twenty  cents  a  pound. 

Long  after  the  Civil  War  had  ended  and 

the  country  had  settled  down  to  conserva- 
tive business,  publishers  still  continued  to 
pay  ten  and  twelve  cents  a  pound  for  their  supply. 
Gradually  the  price  sank  to  eight,  seven  and  five  cents, 
and  ultimately  dropped  to  two  cents,  and  even  one  and 
a  half  cents  per  pound.  Looking  back  over  a  period 
of  thirty  years  we  see  then  that  there  has  been  a  steady 
decrease  in  the  price  of  news  paper  with  the  exception 
of  the  little  flurry,  when  the  figures  went  to  a  point  so 
low  that  it  was  impossible  to  maintain  them  there  and 
sustain  the  industry. 

Whitelaw  Reid,  proprietor  of  the  New  York  Tri- 
bune, in  a  speech  before  the  American  Paper  and 
Pulp  Association,  in  February,  1899,  speaking  on  this 
point,  said:  "We  have  seen  paper  gradually  sinking 
until  it  stands  now  steady  to  firm  at  two  cents  a  pound, 
(with  a  vast  deal  of  grumbling  if  it  is  not  up  to  the 
standard.  And  I  am  now  here  to  say  that  I  am  satis- 
fied. I  am  not  anxious  to  have  paper  made  any  cheaper. 
I  incline  to  the  belief  that,  on  the  whole,  the  greatest 
good  of  the  greatest  number  will  probably  be  con- 
served by  not  making  paper  any  cheaper  than  it  is 
to-day." 


00 

Instances  might  be  multiplied  almost  be- 

Similar  Results  in  yon(j  number,  showing  how  history  has  re- 
Other  Industries     J  ,     .  ,  .    , 

peated  itself  in  the  case  of  other  great  indus- 
trial enterprises,  revealing  the  successive  stages  in 
increasing  industrial  efficiency  at  the  same  time  with 
lowering  prices.  For  many  years  the  American  Sugar 
Refining  Company  largely  had  control  of  the  sugar 
market.  Notwithstanding  the  opportunity  which  its 
commanding  position  seemed  to  give  it,  the  price  of 
sugar  constantly  decreased,  while  its  quality  was  as 
steadily  improved. 

In  1880  the  price  of  grocer's  standard  A  white  sugar 
was  $948^  per  barrel,  according  to  the  reports  of  the 
New  York  Chamber  of  Commerce.  Every  subsequent 
year  showed  a  fall  in  price,  until  in  1887  it  was  only 
$5.66  per  barrel.  In  1888  the  price  of  granulated  sugar 
was  seven  and  five-eighths  cents  per  pound.  In  the 
closing  months  of  1899  the  retail  price  in  the  New 
York  market  was  three  and  one-half  pounds  for  sixteen 
or  seventeen  cents.  It  may  be  argued  that  these  latter 
prices  may  have  been  due  somewhat  to  the  great  com- 
petition that  set  in  against  the  American  Sugar  Re- 
fining Company  in  that  year.  But  even  previous  to 
that  time,  when  there  was  no  strenuous  competition, 
the  family  supply  of  sugar  was  bought  of  the  retail 
grocer  in  New  York  markets  at  a  price  from  eighteen 
to  twenty  cents  for  three  and  one-half  pounds. 

Cotton-seed  oil  commanded  47.94  cents  per  gallon  in 
1878.  In  1883  it  was  47.08  cents  per  gallon.  The  fol- 
lowing year  saw  the  consolidation  of  the  cotton-seed 
oil  manufactories  of  the  country.  Within  four  years 
the  price  had  fallen  to  38.83  cents  per  gallon,  and  by 
the  summer  of  1899  to  25  cents  per  gallon. 


ADMINISTRATION    AND    PRODUCTION  61 

After  all,  however,  considerations  of    the 
A  Striking 
Illustration  fluctuations  and  constantly  downward  ten- 

of  Economic  Law  dency  of  prices  are  in  themselves  of  rela- 
tively little  consequence  to  the  public.  They  are  prin- 
cipally interesting  and  important  from  another  point  of 
view,  that  of  the  exposition  of  a  great  economic  prin- 
ciple and  their  relations  thereto.  As  such  they  have 
been  utilized  here  in  the  case  of  several  of  the  indus- 
tries in  which  the  effect  of  combined  capital  has  been 
most  notable.  They  point  to  and  emphasize  a  great 
truth  that  is  really  the  only  important  thing  worth 
more  than  a  passing  thought  in  this  connection. 

Probably  the  Standard  Oil  Company  presents  as 
conspicuous  an  example  as  can  be  found  of  the  real 
operations  of  combined  capital  in  the  control  of  indus- 
trial enterprise,  working  strictly  and  compulsorily  in 
accordance  with  the  laws  of  supply  and  demand.  Sev- 
eral things  that  are  as  plain  truths  as  that  two  and  two 
make  four  are  deducible  from  the  history  of  this  com- 
pany. They  cannot  be  too  strongly  emphasized  and 
they  must  be  kept  constantly  and  clearly  in  mind  in 
any  rational  consideration  of  this  subject  or  in  any 
conclusions  regarding  it  that  have  definite,  practical 
value. 

In  selecting  the  Standard  Oil  Company  for  an  illus- 
tration, it  is  simply  taken  as  a  type  of  the  contempo- 
raneous industrial  organization  and  not  for  any  in- 
dividual peculiarities  that  may  differentiate  it  from 
others.  Like  all  other  corporations,  this  company  was 
organized  and  has  been  continued  in  operation  for  the 
sole  purpose  of  making  profits  for  its  shareholders. 
Beyond  all  question  those  who  have  controlled  its  af- 
fairs would  have  refrained  from  the  expense  attending 


63  THE    OTHER    SIDE 

the  introduction  of  improved  methods  of  production 
and  distribution  and  would  have  continued  to  charge 
the  public  high  prices  for  oil,  profiting  more  largely 
for  themselves  by  such  a  policy,  if  it  had  been  possible 
for  them  to  conduct  their  business  and  to  achieve  satis- 
factory financial  results  under  those  conditions  and  by 
those  methods. 

That  is  human  nature  and  praiseworthy    business 
enterprise.     Had  they  manifested  any  other  disposi- 
tion   they  would  be  fairly  chargeable  with    lack    of 
ordinary  business  sagacity  and  of  that  energy   and 
farsightedness  that  is  at  the  basis  of  all  prosperity. 
E         '  La        When,  therefore,  we  find  that  this  company 
Absolute  Protec-   has  not  conducted  its  business  in  the  man- 
tion  to  the  Public  ner  just  referre(j  to,  but,  on  the  contrary, 

has  steadily  lowered  prices  and  improved  the  quality 
of  its  products,  we  must  look  for  the  cause  in  some- 
thing entirely  separate  from  the  inclinations  or  the 
powers  of  its  managers.  That  cause  will  be  found  in  the 
irresistible  force  of  an  economic  law  that  demands  im- 
proved economy  in  production  and  administration,  and 
a  consequent  reduction  in  prices,  as  the  imperative  con- 
dition of  successful  and  profitable  business  under  mod- 
ern conditions. 

Not  even  this  company,  with  its  enormous  capitali- 
zation and  its  favorable  conditions  for  monopoly  of  the 
market,  has  been  able  to  withstand  the  operations  of 
this  law.  That  those  who  have  been  entrusted  with  the 
control  of  its  affairs  have  adopted  the  course  that  they 
have,  conclusively  demonstrates  that  they  have  been 
able  to  do  a  successful  business  only  with  due  con- 
sideration to  the  reasonable  demands  of  the  consuming 
public. 


ADMINISTRATION    AND    PRODUCTION  63 

Unquestionably,  that  has  been  the  experience  of 
every  combination  of  capital  that  has  undertaken  to  ex- 
ploit any  considerable  field  of  industry.  Now  and 
then  there  may  seem  to  be  examples  to  the  contrary. 
These  are  merely  ephemeral,  however,  and  ultimately 
they  have  wrought  out  their  own  destruction;  their 
wrecks  have  strewn  the  shores  of  the  business  world. 
It  is  not  possible  for  any  corporation,  no  matter  how 
large,  to  do  what  the  Standard  Oil  Company  has  been 
unable  to  succeed  in  accomplishing.  Therein  is  the 
absolute  protection  of  the  public.  All  experience  has 
fully  demonstrated  that,  and  the  future  will  not  show 
the  contrary. 

High  Prices          Probably  no  single  point  in  relation  to  the 
Feared  by  the     possible  effect  of  trusts  has  been  more  gen- 
erally debated  than  that  touching  the  prices 
they  may  be   able  to  maintain  upon  the  products 
they  essay  to  control  either  wholly  or  in  part.    A  great 
deal  has  been  constantly  said  about  high  prices  upon 
all  kinds  of  articles,  and  especially  upon  many  of  the 
common  necessaries  of  life. 

Whenever  prices  have  gone  up  popular  opinion  has 
been  quick  to  attribute  this  result  to  the  arbitrary  ac- 
tion of  the  trusts;  on  the  contrary,  when  prices  have 
fallen  there  has  been  no  disposition  manifested  to  credit 
the  trusts  with  this  result.  There  has  been  little  in- 
clination to  consider  at  all  whether  these  fluctuations 
in  prices  might  not  be  due  to  causes  entirely  outside 
the  province  of  capitalistic  activity  and  quite  beyond  its 
control. 

It  is  easy  to  argue  that  the  whole  intent  of  capital 
concentration  is  to  raise  prices  to  the  advantage  of  the 
share-owners  of  the  enterprise.  Popular  opinion 


64 


will  generally,  for  a  time  at  least,  follow  in  the  easiest 
and  most  thoughtless  way. 
Influence  of  Pools  The  record  that  the  pools  and  syndicates 


and  Syndicates     that  were  so  pOpUlar  a  dozen  years  or  more 
Opinion  ago  left  behind  them,  still  has  its  effect  upon 

the  public  mind.  Those  trade  combinations  were 
frankly  and  fearlessly  devised,  simply  and  solely  to  in- 
crease prices  and  thereby  raise  profits  to  the  advantage 
of  the  pockets  of  their  promoters.  The  idea  of  merely 
serving  the  public  to  the  best  possible  advantage  and 
deriving  profit  therefrom  was  entirely  foreign  to  those 
propositions.  Naturally,  a  large  part  of  the  public  has 
not  yet  learned  to  discriminate  between  those  earlier 
combinations  that  were  really  in  restraint  of  trade  and 
the  public  interests,  and  the  later  day  industrial  or- 
ganizations. High  prices  are  expected  from  trusts 
largely  because  that  was  the  constant  accompaniment 
of  the  earlier  pools  and  syndicates.  People  look  to 
definite  facts  and  are  not  at  first  inclined  to  analyze. 
The  ill  repute  that  attached  to  the  first  big  trade  com- 
binations has  persistently  followed  their  successors. 

.     .     r       Nevertheless,  it  is  a  proposition  that  has  the 
high  prices  Can- 

not Be  Perma.  absolute  force  of  law,  that  no  individual,  no 
nently  Maintained  firnij  no  corporation  and  no  amalgamation 
of  corporations,  however  large  or  small,  or  whether  in- 
volving little  capital  or  much,  can  raise  the  prices  of 
their  products  to  an  unreasonable  figure  and  success- 
fully maintain  them  for  any  considerable  time. 

There  is  an  immutable  law  of  supply  and  demand 
that  regulates  such  things,  and  no  man  nor  any  com- 
pany of  men  has  the  power  to  rise  superior  to  it. 
The  needs  of  mankind,  the  abundance  or  scarcity  of 
natural  resources,  the  general  prosperity  of  communi- 


ADMINISTRATION    AND    PRODUCTION  65 

ties,  increasing  or  decreasing,  as  may  be,  their  pur- 
chasing powers — these  are  the  things  that  fix  prices, 
and  not  the  arbitrary  determination  of  any  individual 
or  individuals,  with  eyes  open  only  to  the  possibility  of 
their  own  profits. 

Sometimes  people  may  be  induced,  temporarily,  to 
pay  a  little  more  for  things  than  they  have  been  accus- 
tomed to,  but  in  the  long  run  a  rise  of  a  few  cents  per 
pound  or  a  few  dollars  per  ton  results  in  an  immediate 
decrease  in  demand  that  brings  prices  down. 
Low  Prices  Not    High  prices  are  not  necessarily  objection- 
Always  able,  nor  is  cheapness  always  something  to 

Advantageous  be  desired<  Benjamin  Harrison  once  told 
us  that  "a  cheap  coat  covers  a  cheap  man,"  and  as 
offensive  as  the  phrase  may  be  from  some  points  of 
view,  there  is  a  forceful  element  of  truth  under  it. 

Cheapness  that  comes  from  poverty  and  that  caters 
to  individuals  or  communities  without  the  means  to 
purchase  good  articles  at  a  reasonable  price,  is  cer- 
tainly nothing  to  be  admired.  It  argues  a  condition  of 
affairs  that  is  profoundly  to  be  regretted.  On  the  other 
hand,  when  the  prevalence  of  high  prices  means  gen- 
eral prosperity,  there  is  abundant  reason  for  rejoicing. 
Generally  speaking,  high  prices,  prosperity  and  com- 
fort travel  hand  in  hand. 

When  the  price  of  wheat  goes  up,  for  example,  no 
one  can  be  found  who  believes  that  thereby  disaster 
threatens  the  country.  It  is  recognized  that  the  ad- 
vance in  the  price  of  wheat  is  an  indication  of  the 
wholesome  prosperity  of  the  country.  It  not  alone 
benefits  the  great  agricultural  population  which  profits 
directly  thereby,  but  it  also  improves  the  financial  con- 
dition of  the  entire  country.  When  wheat  is  sold  at 


06  THE    OTHER    SIDE 

fifty  cents  a  bushel,  there  has  been  general  stagnation 
in  all  industries.  A  rise  in  the  price  has  not  only 
accompanied  prosperity,  but  has  been  a  potent  factor 
in  stimulating  it. 

L,   u   L  What  is  true  of  wheat  applies  with  equal 
Reasonably  High  .  .     , 

Prices  Develop  force  to  all  other  products  of  industry,  agri- 
Prosperity  cultural,  manufacturing  or  mining.  Exces- 
sive prices,  beyond  their  actual  value  or  the  real  con- 
suming power  of  the  public,  cannot,  of  course,  be 
defended  from  any  point  of  view.  Nor,  indeed,  can 
they  be  maintained  for  any  length  of  time.  The  law 
of  supply  and  demand  will,  in  the  end,  regulate  that, 
without  regard  to  the  desires  of  those  who  en- 
deavor to  corner  supplies  and  unduly  put  up  prices. 

Reasonably  high  prices  are,  however,  wholesome 
and  in  every  way  a  stimulus  to  the  community.  Such 
a  condition  of  things  long  continued  in  any  branch  of 
industry  shows  that  the  individual  members  of  the 
great  consuming  public  are  enjoying  prosperity.  This, 
in  turn,  reacts  upon  the  industry,  adding  to  its  financial 
success,  increasing  its  stability  and  enabling  it  to  give 
employment,  at  good  and  often  increasing  wages,  to  a 
larger  number  of  employees.  Thus,  this  influence, 
emanating  from  high  prices,  acts  and  reacts  upon  it- 
self, constantly  moving  in  a  circle. 

When  high  prices  generally  prevail,  no  one  ever 
hears  of  bankruptcy  and  receiverships,  of  wholesale 
discharges  of  workingmen,  or  of  large  reductions  in 
wages.  On  the  contrary,  when  prices  fall  too  low, 
bankruptcy,  loss  of  employment  and  low  wages  almost 
invariably  follow.  Reasonably  high  prices  constitute 
a  safer  condition  of  things  than  their  opposites. 


COMPETITION  NOT  DESTROYED 

IMPOSSIBILITY  OF  MAINTAINING  MONOPOLY  IN  INDUSTRIAL 
ENTERPRISES— CONSTANTLY  THREATENED  BY  THE  POTEN- 
TIAL COMPETITION  OF  CAPITAL  SEEKING  PROFITABLE  IN- 
VESTMENT—RESTRAINING INFLUENCE  OF  PUBLIC  OPINION 

_    ..  .  _   ..        Monopolies  in  olden  English  times  were 
Against  regarded  equally  in  abhorrence  with  other 

Monopolies  proceedings  that  were  believed  to  be  in 
restraint  of  trade.  In  fact,  then,  even  more  than  now, 
there  was  little  attempt  to  discriminate  between  the 
two.  In  the  earlier  times  monopoly  was  a  special  grant 
made  by  the  king,  giving  to  a  certain  person  or  per- 
sons, or  political  or  corporate  bodies,  the  sole  right  to 
buy,  sell,  make,  work  or  use  things  for  the  common 
advantage.  Under  these  monopolies  specified  articles 
of  trade  could  be  bought  and  sold  only  by  certain  per- 
sons, and  specified  classes  of  labor  could  only  be  done 
by  those  who  had  grants  of  monopoly  to  their  own 
personal  advantage.  They  existed  in  abundance  pre- 
vious to  1600,  but  in  the  early  part  of  the  seventeenth 
century  they  were  declared  void.  Sir  John  Culpepper 
described  them  in  these  vigorous  terms: 

"Like  the  frogs  of  Egypt  they  have  gotten  posses- 
sion of  our  dwellings,  and  we  have  scarce  a  room  free 
from  them.  They  sup  in  our  cup,  they  dip  in  our  dish, 
they  sit  by  our  fires.  We  find  them  in  the  dye-fat, 
wash-bowl  and  powdering-tub.  They  share  with  the 

67 


M  THE    OTHER    SIDE 

butler  in  his  box,  they  will  not  bait  us  a  pin.  We  may 
not  buy  our  clothes  without  their  brokerage.  These 
are  the  leeches  that  have  sucked  the  Commonwealth 
so  hard  that  it  is  almost  hectical." 

An  inherent  dread  has  existed  in  the  minds 

Popular  Hatred  of  of  all  peopie  of  modern  times,  lest  mon- 
Monopoly 

opoly  shall  again  fasten  itself  upon  the  body 

corporate.  Having  gradually  emancipated  themselves 
from  the  thraldom  of  monopolies  that  generations  ago 
bore  heavily  upon  them,  the  people  do  not  propose  at 
this  late  day  to  return  to  the  old  condition  of  affairs. 

Freedom  in  social,  political  and  industrial  activities, 
and  the  power  to  make  individual  or  corporate  ener- 
gies advance  the  common  welfare,  having  been  at- 
tained and  long  enjoyed,  will  never  be  surrendered. 
On  that  point  there  can  be  no  retrogressive  move- 
ment. Whatever  shall  appear  to  have  within  itself 
either  the  purpose  or  the  power  to  create  monopolies 
in  the  production  and  distribution  of  the  necessaries 
of  life,  will  not,  and  should  not,  for  a  moment,  be  en- 
dured. 

Fear  that  Trusts  With  the  natural  abhorrence  that  is  felt  by 
May  Become  any  free  people  toward  attempts  to  mon- 
Monopohes  opolize  the  common  rights,  privileges  and 
necessities,  it  is  not  surprising  that  there  has  been  an 
almost  overmastering  apprehension  lest  in  tolerating 
the  existence  of  trusts,  the  seed  of  monopoly  may  be 
cultivated  that  will,  sooner  or  later,  become  a  noxious 
plant.  This  undoubtedly  has  been  one  of  the  chief 
causes  that  has  stimulated  public  sentiment  and  agita- 
tion against  trusts.  The  beneficial  side  of  these  aggre- 
gations of  capital  has  been  largely  overlooked.  Their 
size,  the  phenomenal  amounts  of  capital  involved  in 


COMPETITION  NOT  DESTROYED  68 

them;  the  realization  of  the  enormous  power  that  they 
may  exercise;  these  considerations  have  naturally 
forced  themselves  most  on  the  public  attention.  Peo- 
ple have  jumped  to  the  conclusion  that  here,  indeed, 
must  be  that  dreaded  monopoly  in  its  most  aggra- 
vating and  most  fearsome  form. 

There  are  three  things  not  at  all  identical,  which  the 
people  in  their  thought  and  speech  jumble  together 
and  even  attack  without  just  discrimination.  These 
are,  first,  capital  as  such ;  secondly,  centralization,  and 
thirdly,  monopoly.  For  the  most  part,  except  by  con- 
servative thinkers  and  speakers,  the  single  word  mon- 
opoly is  used  to  cover  them  all,  blanket  fashion.  A 
clear  understanding  of  the  specific  qualities  pertaining 
to  each  of  the  three,  and  especially  an  intelligent  and 
frank  acknowledgment  of  the  difference  between  mon- 
opoly and  the  other  two,  are  not  generally  made. 

Careful  investigation,  however,  will  con- 
Essential  Element  ciusjveiy  show  that,  in  cherishing  this  idea, 
of  Monopoly  (  ,& 

the  public  has  taken  council  of  its  fears,  in- 
stead of  being  guided  by  calm  reason.  Massing  of 
capital  does  not  necessarily  give  it  monopolistic 
power,  using  the  term  monopoly  in  its  generally  ac- 
cepted sense,  as  meaning  an  absolute  control  of  the 
production  of  an  article  or  articles,  and  the  use  of  that 
control  to  the  detriment  of  the  public  by  curtailing 
output  and  increasing  prices.  Broadly  stated,  there 
is  no  such  thing  and  can  be  no  such  thing  as  monopoly 
in  industrial  enterprises.  Webster  defines  the  word 
as  meaning  "the  sole  power  of  dealing  in  any  species 
of  goods,  or  of  dealing  with  a  country  or  market,  by 
purchase  or  by  a  license  from  government;  the  sole 
permission  or  power  to  deal;  exclusive  command  or 


70  THE    OTHER    SIDE 

possession."  A  monopoly  then  is  a  monopoly  only 
when  it  has  exclusive  control  of  an  industry  without 
competition. 

Governments  have  established  certain  mon- 

The  Only  opolies  of  their  own,  as.  for  example,  the 

Real  Monopolies  ;  f        •, 

coinage  of  money,  the  handling  of  mails, 

and  the  organization  of  armies  and  navies.  They  also 
grant  monopolies  to  private  individuals  through  pat- 
ents and  copyrights.  In  times  gone  by  they  also  con- 
ceded trading  privileges  of  an  exclusive  character  to 
corporations.  These  latter,  however,  have  long  been 
practically  things  of  the  past,  although  now  and  then 
in  modern  times,  they  have  been  chartered. 

Outside  of  these  special  prerogatives  of  government 
and  the  privileges  that  are  granted  by  them  to  indi- 
viduals or  corporations  for  the  purpose  of  stimulating 
enterprise  or  invention,  or  more  rarely  for  the  purpose 
of  exploring  and  developing  new  countries,  as  in  the 
case  of  the  East  India  Company  of  England,  mon- 
opoly is  no  longer  known.  So  far  as  the  term  is  used 
to  designate,  or  even  to  suggest  by  implication,  the 
possible  character  of  any  modern  industrial  enterprise, 
it  is  not  only  an  error  of  phrase,  but  most  emphatically 
an  error  of  fact. 

There  can  be  no  monopoly  as  long  as  com- 
Petition  or  possible  competition  exists.    In 
that  simple  phrase  is  conveyed  the  princi- 
pal  argument   against   the   danger   of   monopoly   in 
modern    industrial    enterprises.     Competitive    condi- 
tions surrounding  any  particular  business  completely 
deprive  it  of  all  such  power.    No  aggregation  of  capi- 
tal, no  heed  how  large,  and  no  heed  how  securely  it 
may  seem  to  be  intrenched,  can  kill  competition,  un- 


COMPETITION  NOT  DESTROYED  71 

less  it  possesses  and  can  maintain  absolute  control  of 
the  raw  materials  upon  the  utilization  of  which  its  busi- 
ness is  based.  Upon  no  other  conditions  can  anything 
even  approximating  monopoly  be  attained,  and  those 
are  now  practically  impossible. 

It  follows  naturally  that  no  organizations  now  doing 
business  without  special  government  favor  are  in  any 
sense  monopolies.  It  is  true  that  in  certain  lines  of  in- 
dustry some  of  them  control  the  greater  part  of  the 
goods  consumed  by  the  country.  Such  concerns  have 
sometimes  been  described  as  "partial  monopolies,"  an 
appellation  that  really  disputes  itself.  A  monopoly  is 
either  a  monopoly  without  qualification,  or  it  is  no 
monopoly  at  all.  As  W.  Bourke  Cockran  has  ex- 
pressed it:  "A  partial  monopoly  is  about  as  intelligible 
an  expression  as  a  partial  whole." 

There  is  no  occasion  to  fear  any  concern  that  has 
attained  merely  a  partial  monopoly.    Those  who  may 
be  in  the  enjoyment  of  other  parts  of  this  partial  mon- 
opoly will  see  to  it  that  none  of  their  rivals  gains  any 
distinct  advantage  in  the  field,  and  that  means  com- 
petition.   In  fact,  "partial  monopoly"  is  only  another 
way  of  expressing  the  fact  that  competition  exists. 
A  L  dtimat  Wa    ^  kig  consolidated  corporation  that  hopes 
to  Control  the      to  possess  or  largely  dominate  the  market 
must  accomplish  that  result  by  control  of 
the  supply  of  raw  material  or  by  virtue  of  its  economy 
of  production.    In  every  sense,  it  is  really  competitive. 
It  enjoys  its  pre-eminence  and  has  been  successful  in 
the  struggle  for  success  by  reason  of  the  triumph  of 
its  skill,  brains  and  economy  over  other  competitors. 

Nor  does  its  success  free  it  from  further  competi- 
tion. It  must  always  continue  to  keep  up  the  struggle. 


72  THE    OTHER    SIDE 

It  is  always  subject  to  competition,  for  if  it  raises 
prices,  it  immediately  invites  rivalry.  The  cost  of  its 
control  of  the  market,  if  it  has  one,  is  either  wholly 
or  in  part  the  perpetual  low  prices  that  it  offers  to 
the  consumer. 

Bearing  on  this  point,  former  Congressman  Thomas 
B.  Reed  has  a  good  story  that  he  often  tells.  As  re- 
lated by  him  in  an  article  in  the  Saturday  Evening 
Post  of  Philadelphia,  it  runs  this  way: 

"A  good  many  years  ago  a  wise  old  manufacturer 
in  my  district  told  me  the  secret  of  success.  I  said  to 
him:  'You  are  the  only  man  who  makes  these  things. 
You  can  demand  your  own  price.'  Said  he:  'I  am 
trying  every  minute  to  make  these  goods  cheaper  and 
sell  them  cheaper.'  'Why  so?'  'I  am  the  only  man,'  he 
replied,  'in  this  business,  and  I  want  to  stay  so.  If  I 
raised  the  price  I  would  have  a  boom,  but  I'd  lose  a 
business.  In  the  long  run,  business  is  better  than 
boom.' " 

c         . .     E      The    proposition    that    competition     must 
couraged  by         exist  under  any  and  all  circumstances,  even 
those  that  on  the  surface  may  appear  most 
favorable  to  the  creation  of  monopoly,  is  no  mere  mat- 
ter of  theory.     Experience  has  abundantly  demon- 
strated it.    Examples  might  be  multiplied  and  elabor- 
ated to  an  extent  that  would  fill  a  volume  to  show  how 
the  strongest  competition  that  the    world    has    ever 
known  has  grown  up  between  these  modern  aggre- 
gations of  capital. 

In  the  steel  and  iron  industries  we  have  many  cor- 
porations of  enormous  wealth  and  power.  Altogether, 
there  are  not  less  than  thirty  or  forty  concerns  in  this 
one  industry.  They  operate  independently  of  each 


COMPETITION  NOT  DESTROYED  78 

other  and  are  enormously  profitable.  No  one  of  them 
has  ever  been  able  to  obtain  a  monopoly,  and  they 
exist  in  a  constant  state  of  competition. 

The  American  Sugar  Refining  Company,  as  large 
and  powerful  as  it  has  been  financially,  and  as  master- 
ful as  has  been  its  management  of  business,  has  had 
competition  during  its  entire  career.  Its  record  is  one 
of  economic  efficiency  and  increasing  usefulness  to  the 
public  in  producing  better  sugar  at  lower  prices. 
Hence  it  has  not  specially  invited  competition.  Never- 
theless, refineries  have  been  built  and  managed  in 
opposition  to  it,  and  again  and  again  it  has  been  forced 
to  buy  these  out  as  a  measure  of  self-defense.  The 
closing  part  of  the  year  1899  was  made  specially  mem- 
orable in  the  history  of  the  sugar  industry  by  the  re- 
appearance in  the  market  of  several  independent  re- 
fineries. 

Competition         Did  space  permit,  hundreds  of  other  in- 
Strongest  Between  t  ld  b    muitipiied  of  similar  char- 
Oreat  Corpora- 
tions                  acter.      Even  the  Standard  Oil  Company 

has  never  been  entirely  free  from  competition,  and 
its  energy  and  resourceful  methods  have  been  de- 
veloped in  no  small  measure  through  the  influence  of 
this  competition,  real  and  possible.  The  greater  the 
interests  involved  and  the  larger  amount  of  capital 
that  is  invested,  the  more  vigorous  becomes  the  war 
of  competition. 

Where  rivals  are  few  in  number,  competition  is  in- 
variably weak,  because  the  individual  competitors 
have  not  the  ability,  nor  the  financial  resources,  to 
carry  on  more  than  Lilliputian  warfare  against  each 
other.  Between  firms  of  considerable  size  the  struggle 
may  be  more  positive  and  more  productive  of  definite 


74  THE    OTHER    SIDE 

results.  Between  corporations  it  becomes  still  more 
keen.  It  reaches  its  fullest  development  between  the 
big  industrial  corporations  backed  by  amalgamated 
capital. 

In  these  corporations  millions  are  at  stake,  and,  in 
ambitious  resources  and  masterly  skill,  the  combatants 
are  like  big  armies,  albeit  engaged  in  peaceful  war- 
fare. A  fight  between  two  individual  soldiers,  or  even 
two  companies  of  soldiers,  is  not  of  great  force  or  great 
importance.  Multiply  your  companies  by  thousands 
and  the  battle  shakes  the  world.  The  competition  be- 
tween these  trusts,  when  compared  with  the  com- 
petition that  has  heretofore  existed  between  smaller 
enterprises  in  times  past,  is  like  the  battles  of  armies, 
as  compared  with  the  skirmishes  of  small  bodies  of 
troops. 

'd  C  't  I  Potential  competition  is  another  thing  that 
Always  Seeking  wise  business  men  always  hold  in  fear.  The 
Investment  capital  of  the  whole  world  is  ready  to  flow 
wherever  the  most  promising  opportunities  for  its 
profitable  investment  are  revealed.  A  few  years  ago 
millions  of  dollars  went  from  England  to  South 
America,  lured  by  what,  in  the  end,  proved  to  be  false 
hopes  of  rewards.  Now  the  English  millions  are  in- 
vested in  South  African  mines,  or  in  the  railroads  and 
the  industrials  of  the  United  States.  From  Europe 
and  from  the  United  States  capital  is  already  turning 
toward  China.  Nor  in  France,  in  Germany,  or  else- 
where is  it  less  alert. 

Capital  is  sensitive  and  conservative,  but,  at  the 
same  time,  it  must  be  enterprising.  Always  seeking 
investment,  sometimes  it  is  so  eager  that  its  proverbial 
conservatism  is  overcome,  and  it  rushes  in  recklessly 


COMPETITION  NOT   DESTROYED  75 

after  illusive  profits.  Men  do  not  hoard  their  wealth. 
They  demand  that  it  shall  work  for  them,  either  so  that 
they  may  live  in  the  enjoyment  of  its  labors,  or  that 
they  may  have  a  larger  income  than  the  mere  efforts 
of  their  hands  and  brains  can  produce.  Idle  capital  is 
incomprehensible.  Either  it  is  working  hard  to  win  a 
definite  profit,  or  it  is  working  hard  to  find  the  oppor- 
tunity to  work. 

Excessive  Profits  The  field  of  Potable  investment  in  the 
Invite  Fresh  world  has  not  enlarged  as  rapidly  as  capital 
Capital  jiag  mcrease(j  m  volume.  The  perfection  of 

modern  manufacturing  methods  has  brought  it  about 
that,  year  after  year,  less  and  less  capital  has  been  re- 
quired per  unit  of  production.  While  the  consuming 
demand  in  all  directions  has  developed  to  enormous 
proportions,  and  while  millions  upon  millions  more  of 
laborers  are  employed  at  steadily  rising  wages,  less 
and  less  capital  has  been  proportionately  required  for 
carrying  on  these  operations.  The  latter-day  compe- 
tition of  capital  for  opportunity  far  exceeds  in  scope 
and  in  vigor  any  competition  of  industry  to  secure  its 
services. 

Enterprises  that  attempt  to  secure  larger  profits 
than  those  to  which  they  may  be  legitimately  entitled, 
or  to  establish  themselves  in  control  of  any  particular 
field  of  industry,  thereby  hang  out  signal  lights  to  at- 
tract hungry  capital  into  competition  with  them.  At 
once  they  place  themselves  in  danger.  They  invite 
attacks  from  outside  that,  as  experience  has  abund- 
antly proved,  in  the  end  may  not  only  bring  about  the 
destruction  of  all  their  hopes  for  monopoly,  but  also 
may  threaten  their  very  financial  existence. 
When  capital  once  starts  to  flow  toward  certain 


?6  THE    OTHER    SIDE 

investments  it  is  apt  to  overflow,  if  the 

Evils  of  incentives  to  its  movement  happen  to  be 

Over  Competition  .  .  , 

exceptionally  powerful.    Such  an  influx  of 

capital  into  any  particular  branch  of  industry  means 
inflation  of  business,  over-production,  and  strenuous 
competition.  This,  in  the  end,  results  in  loss  all 
around,  alike  to  the  capital  first  invested  and  to  that 
which  has  come  into  use  later  on.  In  fact,  there  is  only 
one  way  by  which  any  business  enterprise  can  come 
near  to  protecting  itself  from  these  determined  assaults 
of  potential  capital.  That  single  way  is  by  keeping 
profits  down  to  such  a  reasonable  point  that  they  will 
not  challenge  others  to  enter  the  same  field.  Any  in- 
dustry that  wishes  to  rest  in  the  reasonably  secure  and 
calm  enjoyment  of  its  opportunities  for  profitable  em- 
ployment must  refrain  from  all  attempts  at  monopoly. 
It  must  forever  abandon  any  hopes  that  it  may  have 
cherished  of  such  a  possible  ultimate  outcome  of  its 
position. 

s  I  C  'tal  More  than  anything  else,  the  trusts  have 
from  Successful  themselves  most  to  fear.  The  same  forces 
Business  t^at  have  driven  them  into  combination  are 

still  controlling  them  and  will  always  control  them  in 
the  direction  of  conservative  conduct  of  affairs.  They 
carry  within  themselves  the  elements  of  their  own  de- 
struction as  monopolies,  whenever  they  may  make 
serious  attempt  to  attain  that  distinction. 

There  is  no  special  advantage  in  monopoly,  un- 
less it  gives  its  possessor  the  ability  to  do  all  the 
business  in  his  particular  line  that  the  country  de- 
mands at  a  reasonable  profit,  or  to  exact  tribute  from 
the  public  by  excessive  prices.  In  either  case  the  re- 
sult would  be  a  large  and  sometimes  an  exceptional 


COMPETITION  NOT  DESTROYED  TT 

interest  on  the  invested  capital.  This,  as  has  already 
been  pointed  out,  invites  the  competition  of  other  capi- 
tal. More  than  that,  it  enters  into  immediate  compe- 
tition, either  with  itself  or  with  capital  from  other 
industries. 

Profits  that  are  derived  from  any  enterprise  imme- 
diately seek  further  employment.  The  company  pro- 
ceeds to  enlarge  its  business  out  of  its  gains,  a  move- 
ment common  to  all  producing  enterprises.  There  is, 
however,  a  limit  to  which  this  can  be  done.  When 
that  has  been  reached  the  surplus  capital  that  has  been, 
and  is  still  being  created  from  the  profits  of  this  busi- 
ness, must  seek  for  investment  in  other  lines  outside 
that  from  which  it  has  come.  Accordingly  we  see 
that  the  successful  operation  of  any  large  industry  con- 
stantly creates  more  and  more  capital  that  must  be 
somewhere  invested. 

Amalgamated  Young  in  vears>  most  of  the  trusts  are,  and 
Capita!  Competes  as  yet,  not  fully  in  working  order,  so  as  to 
with  Itself  secure  the  highest  degree  of  financial  suc- 

cess that  may  be  possible  to  them.  Still  this  acquire- 
ment of  surplus  capital  that,  in  turn,  demands  invest- 
ment, has  already  clearly  manifested  itself.  The  wealth 
of  the  Standard  Oil  Company  having  expanded  in  its 
own  industry  as  far  as  possible,  goes  into  the  iron  and 
steel  field  to  compete  with  the  other  great  corporations 
already  established  there.  It  also  finds  employment 
in  the  ore  carrying  trade  on  the  great  lakes. 

The  masters  of  the  Carnegie  Steel  Company  already 
see  that  the  possibilities  of  the  industry  in  which  they 
have  amassed  fortunes,  will  soon  be  inadequate  to  the 
utilization  of  their  surplus  capital.  The  new  charter 
of  the  company  in  1900  gave  it  the  privilege  of  engag- 


78  THE    OTHER    SIDE 

ing  not  only  in  iron  and  steel  manufacturing,  but  in 
mining,  railroad  transportation,  water  transportation, 
banking  and  other  occupations. 

The  more  successful  an  enterprise  may  be  in  achiev- 
ing profits  for  its  share-owners,  the  more  it  adds  to  the 
surplus  capital  that  must  find  investment  somewhere, 
and  that  will,  sooner  or  later,  come  into  competition 
with  that  from  which  it  was  derived,  or  with  that  en- 
gaged in  other  occupations.  Every  successful  trust 
organization  is  doing  the  same  thing  year  after  year. 
A  blind  man  should  have  no  difficulty  in  seeing  the 
ultimate  result. 

Public  sentiment  has  always  been,  and  will 

Rccs*r*'"inS  ^ff.ect  continue  to  be,  a  potent  factor  in  restraining 
of  Public  Opinion 

monopoly.     The  feeling  of    opposition  to 

trusts,  unreasonable  and  unthinking  as  it  may  be  in 
many  respects,  and  as  devoid  of  definite  results,  has, 
nevertheless,  in  a  certain  way,  exercised  a  wholesome 
curbing  influence.  However  the  operators  of  trusts 
might  wish  to  secure  monopoly  advantages,  they  have 
a  profound  respect  for  public  opinion. 

This  feeling  may  not  arise  spontaneously  from  any 
special  approval  of  the  public  attitude.  On  the  con- 
trary, it  may  be  developed  more  from  fear  or  dread 
of  what  may  result  therefrom.  To  what  point  of  defi- 
nite action  the  resentment  of  public  opinion  might  lead, 
under  the  influence  of  real  or  fancied  cause  of  provo- 
cation, is  an  uncertain  quantity.  Its  very  uncertainty 
is  what  gives  it  strength.  One  is  apt  to  hesitate  a  long 
time  before  going  too  far  in  stirring  up  an  opposition, 
the  consequences  of  which  it  may  be  impossible  accu- 
rately to  predicate  from  any  point  of  view,  of  theory,  or 
experience. 


COMPETITION  NOT  DESTROYED  79 

c  The  workingman,  the    agriculturalist,  the 

Capital  professional  man,  the  small  tradesman,  the 

Ant|-Mon°P°listic  middle  class  consumer,  these  all  know  that 
monopoly  is  vitally  opposed  to  their  material  interests, 
and  are  in  arms  against  the  merest  suggestion  that  it 
may  attain  ascendency  in  any  branch  of  industry.  As 
a  matter  of  fact,  many  large  capitalists,  who,  from  their 
commanding  positions  in  the  control  of  certain  indus- 
tries, might  naturally  be  regarded  as  having  monopoly 
inclinations,  are  quite  as  anti-monopolistic  as  any  of 
their  fellow-citizens.  They  fully  realize  that  whatever 
temporary  advantage  might  accrue  to  them  and  the 
special  enterprises  in  which  they  are  interested,  the 
ultimate  results  could  not  fail  to  be  in  the  highest  de- 
gree detrimental.  More  than  that,  all  through  the 
country  capital  that  is  not  massed  in  colossal  holdings 
is  opposed  to  that  which  has  become  aggregated.  It 
is  keenly  watchful  of  all  the  movements  of  the  latter, 
and  may  be  counted  as  one  of  the  strongest  restraining 
influences  against  monopoly. 

n   ..      .-        From  some  quarters  comes  the  expression 
porate  Influence  of  a  fear  lest  trusts,  through  the  exercise  of 
Upon  Legislation  the  power  of  concentrated  wealth  may  be 
able  to  control  legislation  to  the  injury  of  the  public. 
Undoubtedly  corporations  have  in  the  past  exercised 
an  influence  not  always  healthful,  upon  federal  and 
State  legislative  bodies.    Probably  they  will  never  en- 
tirely forego  this  privilege. 

It  is  equally  true,  however,  that  corporate  influence 
upon  legislation  is  growing  less  year  after  year.  Such 
power  as  it  possessed  in  the  quarter  of  a  century  fol- 
lowing the  Civil  War  no  longer  belongs  to  it.  Con- 
spicuous attempts  that  have  been  made  by  corpora- 


80  THE    OTHER    SIDE 

tions  in  recent  years  to  secure  favoring  legislation  have 
been  repeatedly  conspicuous  failures. 

In  the  last  ten  or  twenty  years  of  the  century,  more 
legislation  inimical  to  corporations  was  placed  upon 
the  statute  books,  national  and  State,  than  that  which 
was  favorable  to  moneyed  interests.  Exceptions  there 
were,  but  on  the  whole  the  tendency  of  legislation  is 
more  and  more  toward  the  general  public  welfare  and 
against  special  interests.  As  respects  legislation,  the 
trusts  have  more  to  fear  from  the  people  than  the  peo- 
ple have  to  fear  from  the  trusts. 


CAPITALIZATION  AND  OWNERSHIP 

SHARES  OF  LARGE  CORPORATIONS  WIDELY  DISTRIBUTED— 
MULTIPLIED  OPPORTUNITIES  FOR  INVESTMENT  BY  WORK- 
INGMEN  AND  THOSE  OF  MODERATE  MEANS-OVERCAPITAL- 
IZATION SURE  TO  RESULT  IN  DISASTER 


Trusts  arc  Merely  TrUStS  aS  they  n°W  exist  are  simPlv  COr' 
Large  porations,  lawful  and  regular  in  form  and 

Corporations  -n  pUrpOse  They  are  organized  exactly  as 
other  corporations  are  organized,  and  for  the  same 
reasons.  They  differ  from  the  ordinary  corporation 
only  in  the  amount  of  capital  involved  and  in  the  ex- 
tent of  their  operations.  Save  in  size,  the  Standard 
Oil  Company  with  its  $110,000,000  capital  stock,  and 
the  Federal  Steel  Company  with  its  $100,000,000  pre- 
ferred and  its  $100,000,000  common  stock,  are  in  no- 
wise different  from  the  Columbia  Cab  Company  with 
$10,000  capital,  the  Empire  Neckwear  Company  with 
$3,000  capital,  and  thousands  of  other  concerns  of  like 
proportions  that  are  incorporated  every  year. 

A  few  men  with  hundreds  of  dollars  to  invest,  organ- 
ize a  stock  company  because  it  offers  the  safest  and 
most  advantageous  form  under  which  to  do  business. 
A  few  men  with  millions  of  dollars  take  a  similar  step. 
In  both  instances,  the  form  is  the  same,  the  purpose  is 
the  same,  and  the  results  are  very  likely  to  be  propor- 
tionately alike.  The  small  corporation  may  succeed. 
or  it  may  be  a  failure,  and  that  too  may  be  the  record 
of  the  larger  one. 

81 


83  THE    OTHER    SIDE 

Most  of  the  actual  capital  in  these  corn- 
Old  Capital 
in  New  Working    binations  is  merely  old  capital  in  another 

form  form.     It  attracts  attention  now,  not    be- 

cause it  is  in  anywise  different  from  what  it  formerly 
was,  but  simply  because  it  has  become  more  conspicu- 
ous. Thirty  concerns,  each  representing  an  average 
value  of  $1,000,000,  and  located  in  widely  separated 
parts  of  the  country,  will  excite  little  comment.  Let 
them  be  consolidated  into  one  big  corporation,  valued 
at  $30,000,000,  and  the  public  is  apt  to  be  carried  away 
with  astonishment  in  contemplation  of  the  magnitude 
of  the  business.  Nevertheless,  it  is  just  the  same  in- 
vestment that  existed  before  in  divided  form,  and  just 
the  same  contribution  to  the  productive  energy  of  the 
country.  Nothing  new  in  the  way  of  capital  has  been 
created. 

This  conversion  of  old  capital  into  new  working 
form  has  really  constituted  the  major  part  of  the  trust 
movement.  Measured  in  dollars  and  cents,  the  indus- 
trial growth  has  been  a  comparatively  small  element 
compared  with  the  financial  change  of  form.  Un- 
doubtedly, later  on,  in  the  natural  course  of  events, 
the  former  will  most  strongly  manifest  itself.  At  pres- 
ent, with  most  trusts,  the  formative  stage  has  not  yet 
been  really  outgrown.  Of  course,  there  is  a  natural 
limit  to  this  conversion  of  capital.  When  all,  or  nearly 
all,  the  older  enterprises  in  a  given  industry  have  be- 
come consolidated,  then  the  industrial  side  of  the  prob- 
lem will  be  surely  dominant. 

Concerning  the     Jt  is  /namAent    upon    the    opponents    of 
Size  of  combinations  of  capital,  on  account  of  their 

Corporations       &{z^  to  fix  a  Hmit  of  capitalization  beyond 

which  incorporations  should  not  be  permitted.    Logi- 


CAPITALIZATION  AND  OWNERSHIP  83 

cally,  the  argument  against  the  large  concerns  is 
equally  as  strong  an  argument  against  the  small  one 
thousand  dollar  corporations. 

Of  course,  we  are  reminded  at  once  of  the  dangers 
that  exist  in  large  corporations,  and  then  we  ask: 
"How  large  must  a  corporation  be  to  be  dangerous, 
and  how  small  may  it  be  to  be  harmless."  If  $200,- 
000,000  is  dangerous,  how  about  $100,000,000?  .  If 
$100,000,000  is  still  counted  as  beyond  the  danger 
line,  how  about  $40,000,000?  If  $40,000,000  trans- 
cends the  limits  of  safety,  perhaps  we  can  stop  at  $20,- 
000,000.  But  there  are  those  who  stand  aghast  at 
$20,000,000.  Perhaps  $10,000,000  would  meet  with 
their  ideas  of  innocuous  capital. 

If  we  have  not  yet  got  far  enough  down  the  scale  to 
satisfy  the  ideas  of  the  most  timid  ones,  to  what  point 
must  we  go  below  which  everybody  will  be  satisfied 
that  capital  is  quite  harmless?  It  would  seem  as 
though  the  mere  statement  of  this  proposition  must 
carry  with  it  the  complete  idea  of  its  absurbity, 
and  the  impossibility  of  seriously  considering  the  ques- 
tion of  aggregations  of  capital  from  the  standpoint  of 
size. 

0     of  Cha         ^s  illustrative  of  this  point,  the  Honorable 

M.  Depew's          Chauncey  M.  Depew  has  often  told  a  good 

storie$  story  of  the  way  in  which  he  at  one  time 

met  the  argument  of  a  man  who  posed  as  an  enemy  of 

millionaire  capital.     It  was  at  a  hearing  before  the 

New  York  Legislative  Assembly  upon  a  proposition 

for  the  regulation  of  railroads.     The    gentleman    in 

question  appeared  in  favor  of  the  measure,  and    in 

opposition  to   aggregated   capital   invested   in   New 

York  railroads.    In  the  course  of  his  remarks,  he  de- 


84  THE    OTHER    SIDE 

clared  himself  in  favor  of  taxing  great  fortunes  out  of 
existence.  He  asserted  that  he  would  draw  the  line  at 
$1,000,000,  because  that  amount  was  necessary  to 
carry  on  a  large  business,  or  he  would  possibly  allow 
$2,000,000,  on  account  of  expansion.  Beyond  that 
amount  he  would  confiscate  every  man's  accumula- 
tions. 

As  Senator  Depew  tells  the  story,  it  was  brought 
out  that  this  man  was  himself  a  millionaire,  being 
worth  about  an  even  million  dollars.  His  idea  of  what 
one  man  should  be  allowed  to  accumulate  was  meas- 
ured entirely  by  the  size  of  his  own  fortune.  It  was 
incomprehensible  to  him  that  the  man  who  had  $500,- 
ooo  could  think  that  amount  should  be  the  limit  of 
permissible  accumulations,  and  not  his  $1,000,000. 

In  no  wise  have  the  opportunities  of  the 
New  Opportum- 

ties  for  Small       smaller  investors  been  reduced  or  hampered 
Investors  ^y  ^  a(jvent  of  the  trust  system  of  organ- 

izing capital.  On  the  contrary,  the  field  for  common 
investment  has  been,  if  anything,  enlarged  and 
improved. 

Before  the  small  corporations  of  the  country  and  the 
independent  firms  were  consolidated  into  the  large 
corporations,  it  was  difficult,  and  even  for  the  most 
part  impossible,  for  any  outside  investor  to  obtain  an 
interest  in  them,  unless  it  was  as  a  working  partner  or 
active  shareholder  ready  to  assume  a  very  respectable 
proportion  of  the  total  investment.  Under  the  trust 
system,  a  radical  change  has  been  brought  about. 
Capital,  instead  of  being  repulsed  unless  it  comes  in 
considerable  amounts,  is  sought  after  and  invited  to 
lend  a  hand  in  the  business  and  to  share  in  its  profits. 
If  the  day  of  large  aggregations  of  capital  has  come, 


CAPITALIZATION  AND  OWNERSHIP  86 

the  day  of  the  small  investor  has  come  at  the  same 
time,  paradoxical  as  that  may  appear.  Never  before 
has  there  been  a  time  when  it  was  so  easy  for  the  man 
with  limited  savings  of  a  few  hundred  or  a  few  thou- 
sand dollars  to  obtain  an  interest  in  great  industrial 
enterprises.  Heretofore  he  has  been  rigidly  excluded 
from  participation  in  these  concerns,  and  hope  of 
securing  some  of  their  profits  has  been  quite  beyond 
him.  Now  he  can  go  into  the  market  at  any  time  and 
make  his  investment,  bcoming  a  share  owner  in  almost 
any  of  the  corporations  that  are  dominating  industry. 
Shares  in  Cor  ^  ^as  ^een  estimated  by  a  conservative  ob- 
porations  Widely  server  that  there  are  now  upward  of  three 
Distributed  hundred  and  seventy-five  thousand  invest- 
ors in  trust  corporations.  Others  have  fixed  the  fig- 
ures even  higher  than  that.  Of  course,  it  is  impossible 
to  determine  the  exact  number,  and  moreover,  it  would 
be  difficult  to  fix  upon  a  standard  of  amount  of  share 
ownership  that  should  be  recognized  as  dividing  the 
large  owners  from  the  small  ones. 

Nevertheless,  it  is  well  known  that  the  number  of 
relatively  small  share-owners  has  marvelously  in- 
creased since  the  incorporation  of  these  groupings 
of  capital,  and  the  figures  that  have  been  broadly 
fixed  probably  err  on  the  side  of  moderation,  if  at  all. 
The  inclination  of  small  investors  to  thus  take  an  in- 
terest in  these  dominant  industries  has  been  so  marked 
that  it  deserves  more  than  mere  passing  attention. 
The  idea  forces  itself  upon  the  mind  whether  this  may 
not  be  the  starting  of  another  economic  movement 
that  may  ultimately  prove  as  notable  and  as  fraught 
with  big  results  as  the  movement  of  capital  toward 
amalgamation  that  has  preceded  it. 


86  THE    OTHER    SIDE 

If  the  small  investors  continue  to  put  their  capital 
into  the  securities  of  consolidated  corporations,  it  is 
possible  that,  in  the  course  of  time,  the  control  will 
pass  largely  into  their  hands.  This  would  be  a  strange 
outcome  of  what  is  now  regarded  as  the  massing  of 
wealth,  but  it  is  by  no  means  an  impossible  result. 
There  is  no  doubt,  whatsoever,  that  capital,  as  repre- 
sented in  the  stock  certificates  of  the  trust  corpora- 
tions, has  become  more  widely  distributed  than  ever 
before.  How  far  or  how  rapidly  this  will  proceed  can- 
not now  be  determined,  but  the  tide  has  set  in  that 
direction.  This  is  a  phase  of  the  trust  problem  that 
will  repay  careful  watching.  It  will  certainly  demand 
more  attention  in  the  near  future  than  has  as  yet  been 
given  to  it. 
Evidence  from  Statistics  in  Willey's  Laborer  and  Capital- 

CorSpaoCraSontS        ist  sh°W   that   in    l88?'   while   the   number 
Statistics  of  corporations  in  Massachusetts  was  less 

than  half  as  many  as  the  partnerships,  the  number  of 
persons  interested  in  corporations  was  fifteen  times 
greater  than  the  number  of  partners.  At  the  same 
date,  the  thirty  private  firms  in  that  State  interested 
in  cotton  manufacture  represented  only  fifty-eight 
persons,  while  the  eighty  corporations  engaged  in  the 
same  industry  represented  nearly  14,000  persons.  The 
same  statistics  show  that  while  in  708  firms  only 
twenty-nine  females  were  interested,  in  319  corpora- 
tions 6,000  women  were  stockholders. 

Trusts  Are  Demo-  In  PrinciPle  and  in  actual  workings,  the  big 

cratic  in  corporations  with  millions    of    dollars    of 

stock  are  thoroughly  democratic.    Because 

we  only  think  of  things  that  we  see  on  the  surface,  we 

are  apt  to  regard  these  great  aggregations  as  repre- 


CAPITALIZATION  AND  OWNERSHIP  67 

senting  the  concentration  of  capital  in  the  hands  of  the 
few.  People  hear  of  the  presidents  and  other  officials 
who  are  popularly  reputed  to  be  millionaires.  Because 
their  attention  is  not  called  to  them,  they  never  think  of 
the  hundreds  of  thousands  of  small  stockholders  who 
divide  ownership  with  the  larger  and  more  conspicu- 
ous shareholders.  It  has  been  stated  that  there  are 
more  than  3,000  stockholders  in  the  Standard  Oil 
Company,  and  Henry  O.  Havemeyer  is  reported  to 
have  said  that  there  are  over  11,000  shareholders  in 
the  American  Sugar  Refining  Company.  Undoubtedly 
other  corporations  will  show  a  like  wide  distribution 
of  ownership. 

These  industries,  as  they  are  now  organized, 
give  an  opportunity  for  general  investment,  such  as 
was  not  possible  before  the  era  of  consolidation.  The 
time  was  when  industries  scattered  throughout  the 
country  were  in  the  hands  of  the  few.  Often  they  con- 
stituted a  sort  of  hereditary  possession,  being  handed 
down  in  close  corporations  or  partnerships  from  one 
generation  to  its  family  heirs  in  the  next.  With  the 
advent  of  the  large  corporation,  this  condition  of 
things  has,  to  a  considerable  extent,  already  disap- 
peared, and,  in  the  natural  progress  of  events,  will,  in 
time,  be  entirely  eliminated. 

....      American  democracy  aims  to  give  to  the 

Americanism  in  .,,.., 

Commercial         many  all  the  social,  political  and  industrial 

Organization  opportunities,  rather  than  to  leave  these  to 
the  limited  few.  In  that  respect,  the  industrial  com- 
binations are  more  thoroughly  American  than  any 
form  of  business  that  has  preceded  them.  It  is  possible 
for  the  many  to  obtain  control  of  any  corporation,  and 
in  this  manner  to  direct  its  destinies  and  to  profit  by  its 


88  THE    OTHER    SIDE 

opportunities  for  success.  Not  even  the  managers, 
whose  names  are  most  familiar  to  the  public,  and  who 
are  popularly  held  to  be  supreme  in  authority,  kings 
in  their  industrial  domains,  can  escape  from  the  con- 
trol of  this  democracy  of  investment. 

It  is  always  within  the  power  of  minority  stock- 
holders to  exercise  some  influence  over  even  the  seem- 
ingly most  independent  officials,  while  the  law  grants 
them  many  rights  and  privileges  that  may  further  cur- 
tail the  powers  of  those  who  occupy  places  of  official 
prominence.  Continuance  in  position,  on  the  part 
of  officials  and  directors  and  their  associates,  is  de- 
pendent upon  the  goodwill  of  the  stockholders. 

One  thing  contributes  much  to  the  popu- 
Special   Advan- 
tages in  Corpor.    lanty  of  corporate  form  of  business.     Men 

atjons  of  moderate  means  can  invest,  with  less 

possibility  of  loss  than  under  any  partnership  agree- 
ment. In  general,  the  liabilities  of  stockholders  are 
limited  to  the  amount  of  their  investment,  while  a  man 
doing  business  alone,  or  with  partners,  risks  his  entire 
property,  whether  it  is  in  the  concern  or  not. 

A  still  greater  convenience  arises  from  the  protec- 
tion that  corporate  investment  gives  in  case  of  the 
death  of  a  stockholder.  This  is  not  only  a  safeguard 
to  the  individual,  but  also  to  the  corporation  itself. 
When  a  man  dies,  his  estate,  if  comprised  largely  in 
corporate  holdings,  is  settled  with  comparative  ease, 
and  with  little  risk  of  loss  to  his  heirs,  or  of  disturb- 
ance to  the  business.  His  heirs  can  sell  or  distribute 
the  stock  among  themselves,  and  the  business  goes  on 
just  the  same,  without  disorganization  or  embarrass- 
ment of  any  kind.  On  the  other  hand,  it  often  happens 
that  the  death  of  a  man  results  in  the  complete  dis- 


CAPITALIZATION  AND  OWNERSHIP  89 

ruption  of  the  business,  of  which  he  may  have  been 
the  sole  owner  or  a  partner.  Even  if  that  does  not 
happen,  the  settlement  of  the  estate  is  much  more  in- 
volved. 

C     ta  tl  These  organizations  of    aggregated  capi- 

Growing  Demand  tal  are  already  in  the  market  for  more 
for  More  Capital  capital.  They  are  in  competition  with  each 
other  in  this  respect,  seeking  the  small  investor,  as  well 
as  the  large  moneyed  man.  Wage-earners  with  small 
savings  can  find  opportunities  for  investment  that  were 
once  denied  them  in  the  very  industries  with  which 
they  are  most  familiar  through  their  employment 
therein.  They  can  thus  themselves  become  capitalists 
and  proportionate  participants  in  all  the  advantages 
that  may  accrue  to  capital,  be  it  large  or  small. 

Profit  sharing,  which  has  long  been  advocated  in 
some  quarters  as  a  panacea  for  many  of  the  existing 
industrial  ills,  may  thus  be  established  in  a  new  way. 
It  may  even  be  possible  that  out  of  this  opportunity 
for  small  capital  to  find  a  place  for  itself,  and  the  cor- 
respondingly extended  distribution  of  stockholding 
in  leading  industries,  a  long  step  will  be  taken  toward 
the  solution  of  the  problem  of  the  relations  of  labor 
and  capital. 

If  labor  and  capital  can  thus  be  harnessed  together 
in  corporations,  properly  organized,  and  with  their 
stock  well  distributed,  the  combination  of  inter- 
ests thus  assured  could  not  fail  to  have  its  effect  in 
establishing  a  greater  comity  of  agreement  between 
the  employer  and  his  employee,  inasmuch  as  both  will 
stand  more  nearly  upon  a  platform  of  mutual  financial 
interests. 

Small  capitalists,  laborers  and  others   are  ready  to 


90  THE    OTHER    SIDE 

join  hands  in  this  financial  and  industrial  movement. 
They  only  ask  for  safe  investments.  Naturally,  they 
will  be  more  cautious  than  those  who  have  larger 
wealth  to  depend  upon.  That  corporation  which  will 
make  its  capital  stock  a  safe  investment  for  its  work- 
ingmen  and  others,  that  will  put  its  business  upon  a 
fair  basis  so  that  a  man  can  feel  reasonably  sure  that  it 
will  yield  him  a  good  income  with  only  the  ordinary 
chance  of  loss,  can  have  all  the  capital  that  it  wishes 
from  an  infinite  number  of  small  investors. 

For  more  than  a  century  and  a  half  the 
Era  of  Productive  American  people  have  been  engaged  in  the 
development  of  their  country.  During  the 
greater  part  of  that  time  most  of  their  energies  were 
devoted  to  the  simpler  forms  of  productivity,  such  as 
agriculture  and  mining,  and  to  the  problems  of  trans- 
portation made  necessary  by  the  marvelous  extension 
of  population  to  all  parts  of  the  continent.  In  the  first 
century  of  the  republic,  manufacturing  industries  were 
of  secondary  importance  to  other  pursuits.  That  was 
the  period  of  their  foundation;  their  expansion  was  to 
come  later. 

The  master  minds  of  the  country  found  the  most 
inviting  opportunities  for  the  exercise  of  their  abilities 
in  the  inauguration  and  upbuilding  of  the  transporta- 
tion systems  that  have  made  the  United  States  the 
wonder  of  the  world.  By  far  the  largest  proportion  of 
American  fortunes  that  date  beyond  the  last  quarter  of 
the  nineteenth  century  originated  in  the  providing  of 
railroad  and  other  transportation  facilities  demanded 
by  the  phenomenal  growth  of  the  country  in  popula- 
tion and  diversity  of  industries. 
With  the  closing  years  of  the  century  has  come  the 


CAPITALIZATION  AND  OWNERSHIP  91 

era  of  the  productive  industries.  The  consuming 
needs  of  the  nation  in  the  necessities  of  common  life, 
as  distinguished  from  those  purely  of  service,  have  be- 
come of  paramount  importance.  Industrial  occupa- 
tions have  engaged  the  attention  of  men  of  finance  and 
of  men  of  the  highest  executive  ability.  They  have 
responded  promptly  and  marvelously  to  the  attention 
that  has  been  given  to  them,  and  have  taken  a  foremost 
place  in  contributing  to  the  prosperity  of  the  country. 
Large  fortunes  have  come  from  them,  until  now  their 
record  of  financial  success  rivals  that  of  any  other 
pursuit. 

Fortunes  Now      industrials  representing  meritorious  prop- 
Made  in  Industrial  erties,  and  financially  based  on  conservative 
Enterprises          values  and  prospects,  constitute  the  safest 
and   most  valuable   forms  of  investment   of   modern 
times.    The  day  of  small  things   has   forever   passed 
away  with  them. 

Through  the  process  of  concentration  of  capital  the 
productive  enterprises  of  the  country  take  their  place 
financially  beside  other  great  corporate  energies.  The 
natural  resources  of  the  country,  the  ever-growing 
consuming  demands  of  the  American  people,  and  the 
wide  possibilities  of  an  almost  limitless  foreign  mar- 
ket, are  sound  elements  that  constitute  the  surety  of 
their  prosperity.  Fortunes  have  already  been  made 
in  them.  Men  who  are  most  in  the  public  mind  as 
examples  of  successful  Americans  who  have  achieved 
extraordinary  monetary  success,  have  been  identified 
with  industrials.  Their  names  will  readily  occur  to 
every  reader.  Most  of  them  have  had  small  begin- 
nings, and  their  success  has  been  through,  and  by 
reason  of,  the  special  industrial  enterprises  with  which 
they  have  been  connected. 


THE    OTHER    SIDE 

Opportunities  for  taking  advantage  of  the 


A  Promising  Field  rismg  tide  of  industrial    productivity    are 
for  Investment  r 

open  to  every  individual.    The  movement 

is  only  at  its  beginning  as  the  twentieth  century  opens. 
Future  generations  will  look  back  upon  it  even  as  we 
look  back  upon  the  inception  of  railroad  transporta- 
tion and  other  forms  of  national  activity  in  the  past. 

At  the  prices  at  which  industrial  securities  are  now 
quoted,  most  of  them  are  good  values.  They  are 
destined  to  grow  in  importance  and  to  increase  in 
value  as  time  goes  on.  It  must  not  be  forgotten  that 
they  have  scarcely  begun  as  yet  to  occupy  the  field 
upon  which  they  have  been  prepared  to  enter.  Almost 
limitless  profits  are  before  them  as  the  years  of  their 
activity  and  increasing  productiveness  arrive. 

Conservatism  and  good  business  judgment 

Investors  Ask  for  are  necessary  on  the  part  of  investors  to 
Information  .  r 

enable  them  to  participate  in  the  future  in- 

dustrial prosperity  of  the  country,  and  to  share  in  the 
profits  that  are  sure  to  come  from  it.  A  wise  man  does 
not  rush  recklessly  into  speculation.  Neither  will  he 
hasten  to  put  his  money  into  industrial  securities  in- 
considerately, or  with  lack  of  attention  to  the  present 
condition  or  reasonable  expectations  concerning  their 
future.  While  believing  that  most  of  these  industrials 
are  sound  properties  and  good  investments  at  fair 
figures,  the  careful  investor  requires  that  he  shall  be 
fully  informed  concerning  them.  When  the  time  has 
arrived  that  this  condition  of  things  shall  prevail,  the 
millions  of  American  capital  will  pour  in  to  support 
industrials,  eager  to  profit  therefrom. 

Illustrations  of  the  benefit  to  be  derived  by  corpora- 
tions through  frankness  with  the  investing  public  in 


CAPITALIZATION  AND  OWNERSHIP  93 

regard  to  their  financial  condition  and  operations  may 
be  found  in  the  history  of  more  than  one  concern.  The 
policy  of  publishing  annual  reports  of  operations  and 
finances,  presenting  full  and  frank  exhibitions  of  the 
exact  condition  of  the  companies'  affairs,  has  been  pur- 
sued. This  has  given  the  investing  public  more  con- 
fidence than  it  would  otherwise  have,  and  has  created 
a  generally  favorable  impression.  The  prices  that  the 
securities  of  such  concerns  command  in  the  market 
show  how  responsive  the  disposition  of  investors  has 
been  to  the  actual  degrees  of  prosperity  thus  made 
known. 

0  c  .  ..  Undoubtedly,  one  thing  that  has  militated 
tion,  Real  and  seriously  against  the  success  of  many  large 
Imaginary  corporations  has  been  the  tendency  to  over- 

capitalization. There  is  probably  more  misunderstand- 
ing on  the  part  of  the  general  public  about  what  is 
called  over-capitalization  or  watered  stock  than  about 
any  other  feature  of  the  trust  problem. 

Over-capitalization  may  be  a  serious  thing  in  the 
case  of  natural  monopolies  that  are  supported  by  the 
adventitious  aid  of  government  in  the  maintenance 
of  fixed  charges.  It  is  possible  for  them  to  insist  upon 
and  often  enforce  the  right  to  derive  from  their  public 
service  a  substantial  or  even  excessive  income  upon 
over-capitalization.  In  the  case  of  competing  indus- 
trial enterprises,  the  situation  is  entirely  different.  The 
earning  capacity  of  the  latter  is  not  derived  from 
special  favors,  nor  does  it  rest  upon  any  opportunities 
save  what  the  open  market  offers  alike  to  them  and 
their  competitors. 

The  excessive  figures  of  capital  stock  and  bonds  at- 
tached to  many  of  the  big  corporations  chartered  in 


94  THE    OTHER    SIDE 

the  last  decade  of  the  century  have  given  rise  to  a  great 
deal  of  talk  about  over-capitalization.  The  thing,  how- 
ever, is  more  imaginary  than  real.  It  is  mostly  on 
paper,  and  the  only  fear  to  be  apprehended  from  it  is 
not  of  injury  that  it  may  do  to  the  community  at  large, 
but  of  danger  of  loss  that  it  may  possibly  bring  upon 
the  investing  public. 

E  •  r  *  Although  the  figures  representing  contem- 
talization  Often  poraneous  amalgamated  capital  appear 
Intangible  enormous,  as  they  are  set  down  in  black  and 

white,  there  is  really  less  cause  than  is  sometimes 
imagined  to  be  alarmed  by  them.  More  or  less  of  this 
great  capitalization  is  merely  on  paper.  It  does  not 
represent  actual  money  invested  either  in  cash  or  in 
properties,  or  any  other  form  of  tangible  values.  It 
expresses  no  more  than  the  hopes  or  ambitions  of 
those  particularly  interested  that  sometime  or  other 
the  business  thus  incorporated  may  be  sufficiently 
prosperous  to  pay  a  fair  interest  on  the  amount  of 
capitalization. 

As  a  matter  of  actual  fact,  much  of  this  stock  is  never 
sold  or  taken  up  in  any  form  whatsoever.  It  remains 
a  drug  on  the  market  or  in  the  corporation  treasury, 
simply  because  the  business  represented  is  not  able 
to  carry  it.  It  really  has  never  had  any  tangible 
existence  save  as  the  figment  of  somebody's  imagina- 
tion. Eventually  it  may  disappear  entirely,  wiped  out 
in  reorganizations  or  in  the  bankruptcy  of  the  concern 
that  has  been  thus  inflated.  It  does  not  even  rise  to  the 
dignity  of  watered  stock  upon  which,  as  we  well  know, 
it  is  often  possible  to  earn  dividends. 

It  is,  of  course,  perfectly  just  and  proper  to 

Socfvluiw*  °f  make  the  caPital  stock  of    any    enterprise 
sufficiently  laige  to  cover  the  actual  assets 


CAPITALIZATION  AND  OWNERSHIP  95 

that  are  taken  into  it  and  also  its  earning  capacity. 
After  that  has  been  done  the  value  of  the  stock  is  estab- 
lished, not  by  the  rate  of  capitalization,  but  by  the 
opinion  of  the  public.  The  nominal  capitalization  of 
an  enterprise  is,  in  itself,  a  matter  of  little  moment. 
Let  a  concern  be  capitalized  at  $1,000,000  and  succeed 
in  paying,  not  in  any  one  year,  but  for  a  succession  of 
years,  five  or  six  per  cent,  dividends  on  its  total  capi- 
talization, and  its  stock  will  sell  at  par.  That  is,  its 
capitalization  stands  for  its  real  value. 

Let  the  same  corporation,  however,  fail  to  earn 
more  than  two  and  a  half  or  three  per  cent,  on 
its  capitalization,  and  its  stock  cannot  be  sold  for 
more  than  fifty  per  cent,  of  its  par.  It  makes  no  dif- 
ference that  its  capitalization  on  paper  is  $1,000,000; 
its  real  value  is  $500,000,  and  by  no  juggling  with 
figures  can  anyone  get  away  from  that  irrefutable 
fact. 

The  stock  markets  reflect  this    condition 

StockT£rkethe  and  fully  demonstrate  the  proposition. 
One  need  only  examine  the  market  re- 
ports day  after  day  to  verify  this  statement.  The  stock 
of  many  of  the  corporations  that  have  been  most  con- 
spicuous in  the  public  eye  during  the  era  of  corporate 
consolidations,  and  that  have  been  capitalized  up  to 
many  millions  of  dollars,  is  a  drug  on  the  market  at 
sixty,  fifty,  forty,  or  thirty  cents  on  the  dollar.  Evi- 
dence is  conclusive  that  the  investing  public  believes 
that  that  part  of  the  assets  of  these  corporations  rep- 
resented by  earning  power  or  good-will  has  been 
largely  over-capitalized.  Investors  hesitate  to  put 
their  capital  into  enterprises,  the  ultimate  value  of 
which  may  seem  to  be  more  or  less  problematical. 


96  THE    OTHER    SIDE 

To  the  task  of  disabusing  the  public  of  this  idea,  the 
wisest  managers  of  corporations  are  already  address- 
ing themselves.  Sound  business  judgment  naturally 
dictates  a  conservative  course  in  this  matter.  It  is 
recognized  that  in  the  long  run  the  good-will  of  the 
solid  investor  is  of  more  value  than  the  merely  specu- 
lative interest  of  the  plunger,  in  building  up  and  sus- 
taining important  industrial  properties.  Over-capi- 
talization does  not  interest  the  latter  one  way  or  the 
other,  but  it  is  apt  to  repel  the  former.  Less  and  less 
will  be  heard  about  over-capitalization  as  time  goes  on, 
and  the  industrial  side  of  the  new  organizations,  more 
and  more  takes  precedence  over  the  financial  side  that 
has  hitherto  been  dominant. 


FOREIGN  MARKETS  AND  THE  TARIFF 

SMALL  CONCERNS  AT  A  DISADVANTAGE— LARGE  CAPITAL, 
IMPROVED  MACHINERY  AND  PRODUCTIVE  EFFICIENT  ESSEN- 
TIAL TO  SUCCESSFUL  COMPETITION  WITH  EUROPEAN  MAN- 
UFACTURERS-THE  TARIFF  AND  THE  TRUSTS 

The  coming  warfare  between  nations  will 

"  be  an  industrial  one-  Jt  has  indeed  already 
commenced.  More  and  more  is  this  com- 
ing to  be  recognized  by  rulers  and  statesmen.  Mili- 
tary wars  are  now  undertaken  for  the  control  of  terri- 
tory that  shall  give  commercial  and  industrial  outlet 
to  great  manufacturing  nations. 

That  is  one  reason;  in  fact,  it  is  entirely  within 
bounds  to  say  that  it  is  the  only  substantial  reason, 
for  the  movement  at  the  end  of  the  century  for  the  dis- 
memberment or  control  of  China  by  the  nations  of 
the  West.  It  has  been  the  dominant  influence  in  Rus- 
sia's constant  struggle  for  mastery  in  the  territories  of 
Asia,  and  for  an  outlet  to  the  waterways  of  the  world. 
In  all  the  little  disputes  over  the  islands  of  the  Pacific, 
the  nations  involved  have  not  failed  to  raise  the  ques- 
tion of  their  commercial  interests.  France,  Germany, 
Belgium  and  Great  Britain  have  been  engaged  in  the 
work  of  subjugating  the  wilds  of  Africa  in  order  to 
turn  them  into  teeming  marts  of  trade,  and  to  make 
the  millions  of  savages  consumers  of  the  products  of 
civilized  industry.  The  real  cause  underlying  the  war 

97 


98  THE    OTHER    SIDE 

between  Great  Britain  and  the  Boers  in  South  Africa 
was  commercial  and  industrial. 

In  this  contention  the  United  States  are 

United  States  Now  destined  to  take  a  conspicuous  part    and 
a  World  Power  .    /  | 

exercise  a  powerful   influence.    We   have 

forever  renounced  the  hermit  policy  to  which  we  have 
heretofore  sedulously  adhered  in  our  relations  to  the 
rest  of  the  world.  With  the  close  of  the  Spanish- 
American  war,  and  the  overthrow  of  Spanish  domina- 
tion in  the  West  Indies  and  the  Philippines,  began  a 
new  era  for  the  American  people.  The  United  States 
became  a  full-fledged  world  power,  and  could  not 
remain  isolated  from  other  nations,  even  if  they  were 
so  disposed. 

Expansion  is  no  longer  a  debatable  question.  We 
have  already  expanded,  and  however  averse  some  may 
have  been  to  this  political  step,  it  is  now  an  accom- 
plished fact.  Having,  as  a  nation,  once  put  our  hands 
to  the  plow,  it  is  impossible  for  us  to  turn  back.  We 
have  entered  upon  a  career  that  must  be  pursued,  cour- 
ageously and  unhesitatingly,  whether  it  may  lead  to 
good  or  ill. 

Industrially  and  commercially,  as  well  as  politically, 
this  revolution  will  be  momentous  and  far-reaching. 
During  the  nearly  third  of  a  century,  wherein  the 
American  productive  industries  were  growing  to  a 
high  state  of  prosperity,  the  home  market,  as  a  rule, 
sufficiently  claimed  their  attention.  The  domestic  de- 
mand was  so  nearly  up  to  the  possible  supply  that 
there  was  little  need  to  attempt  to  cultivate  the  foreign 
markets. 

But  with  the  boundless  resources  of  our  country 
and  our  tireless  industrial  activity,  our  national  capac- 


FOREIGN    MARKETS    AND    THE    TARIFF  98 

ity  for  production  finally  passed  beyond  the  demands 
of  the  home  market.  This  has  long  been  true  of  our 
agricultural  products,  which  for  years  have  been  forced 
to  seek  sale  in  the  markets  of  the  world.  In  a  lesser 
degree  it  has  been  true,  incidentally,  of  a  few  lines  of 
manufacture.  The  industrial  trend  has,  however,  been 
toward  an  expansion  of  our  market.  We  have  learned 
that  we  cannot  forever  live  simply  by  ourselves,  con- 
suming the  entire  products  of  our  own  industry.  We 
must  discover  our  larger  profits  in  ministering  to  the 
needs  of  other  people. 

Tentative  At-  American  manufacturers  have  never  found 
tempts  to  Invade  the  foreign  market  very  susceptible  to  their 
Foreign  Market  influence.  Conditions  of  foreign  industry 
have  been  such  that  it  was  difficult  for  them  to  suc- 
cessfully compete  with  their  foreign  rivals.  The  low 
wages  paid  to  workingmen  abroad  and,  in  general,  the 
contracted  ways  of  living  there  were  elements  that 
entered  into  the  cost  of  production  to  such  an  extent 
as  quite  to  forestall  any  attempts  of  the  American 
manufacturer  under  the  stress  of  higher  wages  and  bet- 
ter living  to  enter  the  market  with  his  goods. 

It  has  been  only  toward  the  close  of  the  great  in- 
dustrial century  that  Americans  have  made  import- 
ant and  successful  attempts  to  invade  the  foreign 
markets.  At  last  we  have  found  that  in  productive  in- 
dustry, no  less  than  in  agriculture,  we  have  developed 
far  beyond  the  capacity  of  exclusively  home  consump- 
tion. Once  we  sent  abroad  a  few  pieces  of  machinery, 
now  and  then  a  little  paper,  some  small  hardware,  a 
few  bales  of  textiles,  and  so  on,  either  because  we 
needed  to  get  rid  of  something  that  happened  to  be  a 
drug  on  a  stagnant  home  market,  or  because  some  one 


100  THE    OTHER    SIDE 

wanted  to  play  with  exporting  for  the  moment.  Now 
we  send  locomotives  and  steel  rails  to  England  and 
other  European  countries,  while  miscellaneous  prod- 
ucts from  our  mills  and  shops  are  establishing  them- 
selves everywhere. 

While  all  the  world  is  now  open  to  Ameri- 

Ind  tto'orient "  can  industry>  the  great  East  undoubtedly 
offers  the  fairest  field  for  exploitation.  The 
trade  that  in  those  parts  has,  for  more  than  a  quarter 
of  a  century,  been  held  by  the  nations  of  Europe,  has 
turned  toward  the  United  States  as  the  twentieth  cen- 
tury appears  in  view.  The  acquisition  of  the  Philip- 
pines was  the  first  step,  and  a  great  step,  toward  the 
East.  Through  that  channel  we  shall  undoubtedly 
have,  in  a  few  years,  a  volume  of  traffic  with  the  Orient, 
compared  with  which,  our  present  foreign  trade  will 
pale  into  utter  insignificance. 

Already,  we  have  exerted  the  strongest  influence 
upon  China,  insisting  that  the  other  nations  of  the 
world  shall  respect  the  maintenance  of  the  open  door 
in  trade  with  that  Empire.  Thus,  we  have  pledged 
ourselves  to  take  a  leading  part  in  the  greatest  task  of 
the  coming  century,  the  reform  of  the  Empire  of 
China.  We  have  served  warning  upon  the  merchants 
of  Europe  who  have  hitherto  thought  it  desirable  to 
surround  their  trade  by  all  manner  of  restrictions  and 
competition.  We  have  declared  ourselves  in  the  field 
of  contest  for  foreign  trade,  regardless  of  competition, 
and  the  rest  of  the  world  fully  recognizes  the  strength 
of  our  position  and  the  doughty  foe  with  which  it  is 
now  brought  face  to  face. 

For  twenty  years  or  more,  before  the  ac- 

Tr"d?U!S3iina  <luisition  of    the    Philippines,  the    United 
States  showed  a  steady  increase  in  its  com- 


FOREIGN    MARKETS    AND    THE    TARIFF  101 

merce  with  China.  The  development  was  slow,  at 
first,  it  is  true,  but  latterly  the  rise  in  the  rate  of  in- 
crease has  been  of  such  proportions  as  to  clearly  indi- 
cate the  magnitude  of  operations  within  our  reach  in 
that  part  of  the  globe. 

Great  Britain's  trade  with  China  surpasses  that  of 
any  other  nation.  A  few  years  ago,  Japan,  India,  and 
the  continent  of  Europe  were  all  ahead  of  the  United 
States.  In  the  past  few  years  we  have  made  such 
steady  progress  that  we  have  already  distanced  the 
continental  nations  of  Europe,  and  so  far  as  the  sta- 
tistics of  1899  go,  have  left  India  behind.  Now  we 
stand  third  among  the  nations  of  Europe  in  the  size 
of  our  Oriental  trade,  with  Japan  as  second,  and  Great 
Britain  first. 

It  is  freely  predicted  that,  unless  unforeseen  obstacles 
arise,  we  shall  pass  Japan  within  two  years,  and  have 
Great  Britain  as  our  only  serious  competitor.  Our 
greatest  trade  with  the  Orient  is  in  cotton  cloths  from 
New  England  and  Southern  mills,  and,  with  certain 
grades  of  these  goods,  we  dominate  the  Chinese  mar- 
ket. What  has  been  accomplished  with  this  line  of 
goods  may  be  as  successfully  done  in  other  branches 
of  American  trade. 

Ad  antages  Pos     Abundant  reasons  exist  why  the    United 
sessed  by  Ameri-  States  should  be  successful  in  competition 
can  Manufacturers  with  other  manufacturing  nations  for  uni- 
versal trade.     In  this  country  are    the    largest    and 
cheapest  water  powers  in  the  world,  with  the  greatest 
amount  of  coal  and  the  cheapest.    Raw  materials  exist 
in  an  abundance  that  gives  us  unequaled  advantages 
in  nearly  all  branches  of  manufacturing.    Our  internal 
transportation  service  cannot  be  surpassed  for  its  ex- 


102  THE    OTHER    SIDE 

cellence  and  its  cheapness;  our  railroads  carry  freight 
for  less  than  half  what  is  charged  in  any  of  the  coun- 
tries of  Europe. 

The  skill  of  American  labor  and  the  superiority  of 
the  goods  that  are  put  upon  the  market,  as  a  result  of  its 
energy,  have  placed  the  United  States  in  the  forefront. 
American  goods,  especially  manufactures  of  iron  and 
steel,  have,  in  many  instances  in  European  markets, 
either  driven  out  the  native  product  or  relegated  that 
to  a  secondary  position. 

Some  years  ago,  an  English  papermaker  who  was 
visiting  this  country  and  examining  the  paper  mills 
here,  said  to  an  American  rival:  "When  you  have  oc- 
cupied your  own  market,  when  you  have  no  longer 
any  market  here,  you  have  a  market  in  England  as 
large    as  your  own,  because  you    can    make    paper 
cheaper  than  we  can,  and  therefore,  in  a  contest  of 
prices,  you  will  be  able  to  take  that  trade  away  from 
us."    What  may  be  true  of  paper  has  already  begun 
to  prove  true  in  many  other  branches  of  manufacture. 
Danger  from         *n  reacmng  out  into  the  foreign  market,  the 
Cheap  Foreign     American  manufacturer,  despite  the  many 
Labor  natural  advantages  that  he  enjoys,  comes  at 

once  into  competition  with  the  labor  of  the  world  in  all 
its  different  grades  of  cheapness.  He  comes  into  com- 
petition with  methods  of  manufacturing  and  selling 
that  have  been  the  outgrowth  of  generations  of  experi- 
ence. He  comes  into  competition  with  soundly  estab- 
lished industries,  and  with  prejudices  and  preferences 
in  the  world's  market  that  have  grown  up  out  of  inti- 
mate commercial  relations  with  other  nations,  extend- 
ing through  long  series  of  years. 

To  combat  these  things  that,  at  the  outset,  seriously 


FOREIGN    MARKETS    AND    THE    TARIFF  108 

militate  against  success,  the  American  manufacturer 
and  importer  has  need  of  something  more  than  the 
methods  of  industry  that  have  prevailed  with  him  and 
his  domestic  competitors  thus  far.  He  cannot,  if  he 
would,  reduce  wages  of  his  workingmen  to  the  coolie 
standard  of  China  and  the  far  East,  or  to  the  peasantry 
standard  of  England  and  Europe.  He  cannot  imme- 
diately overcome  the  momentum  that  has  already  been 
acquired  by  his  rivals  of  other  countries. 

His  only  opportunity  lies  through  that  measure  of 
productive  and  administrative  efficiency  that  has  be- 
come a  dominant  characteristic  of  American  industry. 
It  is  the  tireless  American  business  energy  and  the 
relatively  greater  productiveness  of  capital  and  labor 
in  this  country,  as  compared  with  other  countries,  that 
has  already  enabled  the  United  States  to  engage  suc- 
cessfully in  competition  with  foreign  manufacturers  at 
certain  points,  although,  as  yet,  only  to  a  limited  ex- 
tent. 

Th  S't  f  D  ^  *s  mterestmS  and  important  to  note  that 
mands  Combined  the  expansion  of  our  export  trade  has  come 
Capital  about  almost  coincident  with  the  develop- 

ment of  capital  into  large  corporations.  That  this  is 
not  a  mere  happening  would  seem  to  be  indubitably 
plain.  Highly  improved  machinery,  in  the  invention 
and  use  of  which  we  undoubtedly  surpass  the  world, 
has  had  its  influence.  This  advantage  has  been  sup- 
plemented in  turn  by  economy  of  production,  secured 
through  the  massing  of  capital  and  the  utilization  of 
labor  in  great  armies.  Thus  we  have  placed  ourselves 
in  a  position  where  we  are  able  to  compete  with  the 
manufacturers  of  the  world  under  any  and  all  con- 
ditions. 


104  THE    OTHER    SIDE 

It  is  especially  satisfactory  that  this  can  be  accom- 
plished without  in  anywise  hurting  the  workingman, 
a  fact  that  is  now  so  well  recognized  that  it  does  not 
need  further  demonstration.  Even  on  the  present  scale 
of  wages,  American  ingenuity,  energy  and  labor  capac- 
ity will  beat  the  world  in  the  cheap  production  of  a 
variety  of  manufactured  goods.  That  result  can  only 
be  accomplished,  however,  through  the  exercise  of 
powers  of  large  capital  that  bring  about  economy  of 
production  and  are  able  to  handle  the  foreign  markets 
in  a  big  way. 

Am  I*        d  entrance  into  the  foreign  market  not 

Capital  Created    only  is  possible  alone  to  large  corporations, 
the  Opportunity   but  it  is  also  an  inevitable  outcome  of  the 

amalgamation  of  capital.  Where  industries  are  divided 
between  many  small  concerns,  it  is  not  difficult  for 
them  to  adapt  themselves  to  changing  conditions  of 
demand  and  supply.  When,  to  use  a  stock  phrase, 
"business  is  dull,"  they  can  shut  down  their  shops 
without  serious  impairment  and  start  up  again  when 
more  promising  conditions  prevail.  This  is  a  serious 
disadvantage  to  the  consuming  public,  because  it  in- 
troduces the  element  of  fluctuating  prices  and  uncer- 
tain supply.  It  is  also  a  disadvantage  to  labor  in  that 
it  means  uncertain  wage  returns.  Finally  it  is  to  the 
loss  of  invested  capital. 

Through  the  exercise  of  the  powers  that  amalga- 
mated capital  possesses,  and  that  particularly  enable  it 
to  reach  out  into  the  foreign  market,  these  disadvan- 
tages are,  in  a  large  measure,  removed.  With  them  go 
all  the  disturbing  influences  that  have  so  frequently 
clogged  the  wheels  of  industrial  progress.  With  big- 
ger markets  at  command,  production  may  be  almost 


FOREIGN    MARKETS    AND    THE    TARIFF  106 

abnormally  increased  without  fear  of    reaching    the 
point  of  excess  with  its  resultant  stagnation. 

Moreover,  business  being  carried  on  upon  a  larger 
scale  and  without  interruption,  month  in  and  month 
out,  year  in  and  year  out,  it  is  conducted  cheaper  per 
unit  than  is  possible  under  less  favorable  conditions. 
There  is  less  waste  and  no  necessity  of  making  up  for 
the  losses  of  idle  periods  by  the  undue  economies  or 
excessive  strain  of  the  more  prosperous  times.  By 
supplying  this  outlet  the  foreign  market  gives  consoli- 
dated capital  an  opportunity  that  was  never  possible 
as  long  as  we  attempted  to  engage  in  industry  only 
through  segregated  and  relatively  w:eak  independent 
concerns.  More  than  anything  else,  this  opening  for 
amalgamated  capital  in  the  markets  of  the  world  makes 
toward  the  greater  stability  of  industry,  the  more  cer- 
tain employment  of  labor  at  good  wages,  and  the  in- 
creasing of  the  wealth  of  the  country. 

In  this  new  field  of  business  activity  the 
f  °  s'C'1l  Ca  'tal  ^vantages  tnat  come  from  the  massing  of 

working  capital  in  compact  and  aggressive 
form,  and  the  economies  of  production  that  are  thereby 
possible,  must  take  the  place  of  those  other  advantages 
pertaining  particularly  to  foreign  competitors.  Small 
concerns  have  no  chance  of  success.  They  are  handi- 
capped from  the  outset. 

Capital  must  be  banded  in  large  amounts  for  the  in- 
vasion of  the  foreign  market,  since  the  transactions 
there  must  be  of  large  magnitude,  and  at  the  outset  be 
carried  on  under  more  or  less  discouraging  conditions. 
The  field  is  ours,  as  has  been  already  fully  demon- 
strated in  many  small  ways.  It  cannot,  however,  be 
fully  possessed  by  the  activity  of  hundreds  of  small 


106  THE    OTHER    SIDE 

concerns,  frittering  away  their  opportunities  in  in- 
effectual efforts,  no  matter  how  energetic  they  may  be, 
or  how  well  intended  their  endeavors. 

...        ,  At  the  banquet  of  the  midsummer  meeting 

Views  of  an 

American  Paper  of  the  American  Paper  Manufacturers  As- 
Manufacturer  sociation,  held  at  Niagara  Falls,  in  July, 
1896,  Warner  Miller  made  an  address,  in  the  course  of 
which  he  dwelt  at  considerable  length  upon  the  subject 
of  export  or  foreign  trade  on  the  part  of  American 
paper  manufacturers.  In  view  of  the  situation  as 
it  is  to-day,  his  remarks  displayed  singular  foresight, 
and  what  he  said  is  equally  pertinent  to  other  enter- 
prises as  well  as  to  that  of  paper  making.  From  the 
report  of  his  address,  as  it  was  printed  in  the  columns 
of  The  Paper  Mill,  the  following  excerpt  has  been 
taken,  and  it  will  be  found  illuminating  and  sugges- 
tive in  this  connection: 

"It  (the  foreign  market)  cannot  be  taken  by  one  mill 
or  a  single  concern.  The  amount  of  money  required 
and  consideration  given  to  it  cannot  be  done  by  any 
one  mill,  and  no  one  mill  is  willing  to  go  from  this 
country  into  foreign  markets.  If  we  are  to  have  this 
market  in  England  and  Central  and  South  America, 
and  in  Australia,  it  can  only  be  done  by  some  kind  of 
organization,  by  some  getting  together  of  the  principal 
mills  and  undertaking  this  trade,  and  when  that  is  done 
we  shall  find  a  market  outside  of  our  own  limits  which 
will  take  a  very  considerable  portion  of  all  the  paper 
we  can  make,  and  it  will  take  it  at  remunerative 
prices." 

Asserted  Influence  This  is  not  the  Place  to  enter  UP°n  a  review 
of  High  Pro-  of  the  merits  or  demerits  of  the  protective 
tective  Duties  tariff  system  That  subject  has  been 


FOREIGN    MARKETS    AND    THE    TARIFF  107 

threshed  over  thoroughly  in  American  politics  for  a 
half  century  and  more,  and  its  further  consideration 
at  this  moment  is  scarcely  demanded  by  any  thought 
of  public  interest  or  public  welfare. 

An  idea,  however,  has  been  advanced  in  some 
quarters  that  there  is  an  intimate  connection  between 
the  tariff  and  the  contemporaneous  consolidation  of 
capital,  and  that  the  former  has  been  an  inciting  cause 
and  a  substantial  support  of  trusts  exercising  powers 
of  trade  detrimental  to  the  public  welfare.  Such  a 
theory  must  rest  entirely  upon  the  issue  of  whether 
industrial  organizations  have  succeeded  in  acquiring 
monopolistic  powers  and  in  advancing  prices  to  con- 
sumers. It  is  shown  on  other  pages  of  this  volume 
that  neither  of  these  propositions  is  true.  None  of  the 
trusts  has  a  permanent  monopoly  in  the  product  that 
it  handles.  All  have  been  compelled  to  yield  to  the 
law  of  demand  and  supply  and  of  industrial  progress, 
and  to  lower  prices  instead  of  increasing  them. 

That  the  tariff  has  succeeded  in  keeping  the 
Tariffs  Have  Not 

Prevented  Domes-  home  market  mostly  for  home  industry  is 
tic  Competition  an  indisputable  proposition.  Whether  such 
a  result  has  been  desirable  of  consummation  belongs 
entirely  to  another  field  of  discussion  than  this.  The 
fact  exists,  and,  at  the  same  time,  we  have  seen  a  con- 
stant lowering  of  prices,  an  increasing  of  wages,  and  an 
improved  condition  of  living  for  all  classes. 

Another  thing  is  certain;  the  tariff  has  not  yet  suc- 
ceeded in  permanently  destroying  competition  in  the 
domestic  market.  All  that  it  has  done  has  been  to 
keep  out  foreign  goods  and  give  American  manu- 
facturers a  better  opportunity  than  they  would  other- 
wise have  to  build  up  new  industries  or  to  develop 


108  THE    OTHER    SIDE 

those  already  existing  into  a  higher  degree  of  profit- 
ableness. In  retarding  competition  between  domestic 
manufacturers,  it  has  never  had  any  effect  that  was 
more  than  merely  temporary,  and  most  often  not  even 
that.  Its  real  influence,  so  far  as  relates  to  the  cen- 
tralization of  capital  into  large  industries,  has  been 
only  to  hold  the  domestic  market  exclusively  to  the 
competition  of  domestic  capital  free  from  the  disturb- 
ing influence  of  lower  priced  foreign  products. 

In  one  respect,  however,  the  tariff  fairly 

™y be  termed  "the  mother  of  trusts-"  E* 

removing  the  necessity  of  competition  with 
the  cheaper  produced  and  cheaper  priced  goods  of 
other  countries,  American  manufacturers  have  been 
enabled  to  secure  higher  prices  for  their  products  in 
the  home  market  than  they  could  otherwise  have  done. 
This  exceptional  profitableness  in  many  lines  of  pro- 
duction has  gradually  invited  more  and  more  capital 
into  fields  that  seemed  to  promise  excellent  returns 
for  investment.  In  the  course  of  time  the  desire  to 
profit  by  these  opportunities  has  been  so  insistent  that 
over-production  has  resulted,  and  severe  competition 
has  set  in.  Out  of  that  condition  of  affairs,  as  is  dis- 
cussed in  another  chapter,  has  arisen  the  demand  for 
consolidation  of  hitherto  competing  individual  con- 
cerns into  the  single  large  corporations  that  we  call 
trusts.  Therefore,  tracing  the  genesis  of  the  trust 
movement  backward,  step  by  step,  we  may  find  that 
the  expansion  of  industry  brought  about,  more  or  less, 
through  the  influence  of  the  protective  tariff,  was  one 
of  the  primary  influences  that  called  it  into  being. 

Those  who  hold  that,  to  use  the  words  of 

P!atee0|fnduestIJn     Henry  °-  Havemeyer  before  the  United 
States  Industrial  Commission  in  the  sum- 


FOREIGN    MARKETS    AND    THE    TARIFF  109 

mer  of  1899,  "the  mother  of  all  trusts  is  the  customs 
tariff  bill,"  point  to  the  record  of  the  tin  plate  manu- 
facturing industry  as  a  conclusive  illustration  of  the 
truth  of  Mr.  Havemeyer's  declaration.  Under  the 
stimulus  of  the  McKinley  protective  tariff,  the  tin  plate 
industry  was  started  in  this  country. 

In  the  last  half  of  the  year  of  1891  we  produced  in 
the  United  States  2,236,743  pounds  of  tin  plate;  in 
the  year  ending  December  31,  1898,  we  produced 
732,290,285  pounds.  Each  year  from  1891  showed  an 
increase  in  amount  of  production.  When  tin  plate 
was  on  the  free  list,  and  we  were  entirely  supplied  from 
England,  the  price  was  $5.10  per  box.  After  the  indus- 
try had  become  well  established  the  price  fell,  until,  at 
one  time,  it  was  only  $2.75  per  box.  In  the  fall  of 
1898  the  price  was  $3  per  box. 

The  history  of  the  industry  up  to  that  point  was 
similar  to  others  protected  by  the  tariff  in  control  of 
the  home  market,  through  the  exclusion  of  foreign 
products.  When  it  had  once  been  successfully  estab- 
lished, it  attracted  capital  as  an  exceptionally  promis- 
ing investment.  Many  new  factories  were  established; 
production  soon  exceeded  demand ;  strong  competition 
set  in,  and  the  price  was  reduced  to  a  figure  that  made 
it  little,  if  at  all,  profitable. 

-  ,  Naturally,  out  of  this  condition  of  affairs, 

Consolidation  of  • 

Tin  Plate  that  threatened  to  undo  all  that  had  been 

Manufactories  accomplished  during  the  preceding  seven 
or  eight  years,  came  a  demand  for  the  consolidation  of 
different  competing  concerns  into  a  single  corpora- 
tion. Immediately  this  had  been  accomplished,  the 
price  of  tin  plate  went  up  from  $3  to  $4,  and  then  to 
$4.80,  the  figure  that  prevailed  in  1899. 


110  THE    OTHER    SIDE 

Unquestionably,  this  was  a  large  advance,  and  it 
was  considered  in  many  quarters  as  unduly  high.  It 
must  not  be  forgotten,  however,  that  during  the  period 
covered  by  the  operations  of  the  American  Tin  Plate 
Company  and  the  increase  in  the  price  of  its  product, 
there  were  large  advances  in  the  cost  of  all  raw 
materials,  an  increase  in  wages  arid  in  other  expenses 
that  enter  into  the  cost  of  production,  and  that  have 
contributed  to  the  advance  in  the  price  of  the  manu- 
factured article. 

To  what  extent  these  influences  covered  the  en- 
hanced price,  or  how  much  of  the  addition  might  be 
regarded  as  excessive  and  a  result  of  a  substantial 
control  of  the  market,  is  a  matter  concerning  which 
differences  of  opinion  may  be  honestly  held.  But, 
however  that  may  have  been,  the  inevitable  result  fol- 
lowed in  this  case,  as  it  comes  in  every  instance  where, 
whether  by  combination,  monopoly,  tariff  protection, 
or  for  other  reasons,  any  industry  has  attained  to  ex- 
ceptional prosperity,  and  profitableness.  Other  in- 
vestors awakened  to  the  opportunity  and  entered  the 
field.  Competition  set  in  again  in  tin  plate  manu- 
facturing, and  its  influence  may  be  depended  upon  to 
keep  the  industry  down  to  normal  conditions  as  re- 
gards the  price  of  its  product  or  to  bring  it  to  that 
point  again,  if  so  be  it  may,  for  specific  reasons,  tem- 
porarily have  departed  therefrom. 

Results  of  the  Speaking  of  this  industry  and  its  opera- 
Tin  Plate  Consoli-  tions,  Professor  George  Gunton,  in  Gun- 
dation.  ton>s  Magazine  of  May,  1899,  said:  "It  is 

worth  noting  in  this  connection  that  the  price  of  tin 
plate,  with  the  increase  of  eleven  per  cent,  in  wages,  is 
still  $1.10  (subsequently  eighty  cents)  a  box  less  than  it 


FOREIGN    MARKETS    AND    THE    TARIFF  111 

was  when  we  relied  on  foreign  supply  for  all  our  tin 
plate  under  free  importation.  What  has  really  been  ac- 
complished is  this — the  tin  plate  industry  has  been 
transferred  to  this  country;  whatever  profits  there  are 
now  go  to  American  investors ;  the  wages  expended  in 
that  industry  are  distributed  to  American  laborers; 
these  wages  have  been  increased,  since  the  trust  was 
organized,  eleven  per  cent.;  the  producers  are  un- 
doubtedly making  a  good  profit,  and  still  the  product 
is  sold  to  American  consumers  at  $1.10  a  box,  or 
twenty-two  per  cent.,  less  than  before  the  tariff  was 
adopted  and  the  trust  organized." 

In    stimulating   American    industry    to    a 

hi^h  de^"ee  of  activity>  and  thus  encourag- 
ing exceptional  competition  among  those 
enterprises  to  which  the  benefit  of  protection  has  been 
extended,  the  tariff  has  exercised  a  powerful  influence. 
On  general  principles,  the  remedy  for  monopoly  or 
constriction  of  trade  will  not  be  found  in  the  limita- 
tion of  internal  competition.  So  far  as  the  removal 
of  tariff  duties  might  lead  to  the  invasion  of  the  domes- 
tic market  by  foreign  trade,  and  thereby  force  Ameri- 
can manufacturers  into  closer  and  less  competitive 
alliances  than  ever  before,  the  measure  would  be  ex- 
ceedingly dangerous.  As  an  incentive  to  new  com- 
petitive enterprises  in  all  industries  that  hold  out 
promise  of  profitable  investment,  whether  they  are 
largely  controlled  by  trusts  or  not,  the  protective  tariff 
has  its  sphere  of  usefulness.  It  will  be  quite  time  to 
consider  the  wisdom  of  making  a  change  in  this 
economic  policy  on  the  ground  that  it  helps  trusts 
when  it  shall  appear  that  monopoly,  restriction  of 
production,  and  increase  of  prices  have  been  brought 


112  THE    OTHER    SIDE 

about  through  the  operations  of  amalgamated  capital. 
At  this  point  both  protectionists  and  free  traders 
should  be  in  substantial  agreement.  Arguments 
regarding  the  tariff  can  be  sensibly  continued  only 
along  lines  of  general  economic  theory  and  practice, 
as  in  years  past.  To  use  the  tariff  as  a  weapon  in 
special  attacks  upon  particular  trusts,  on  account  of 
its  fancied  advantages  to  them  is  a  dangerous 
proposition  economically  and  politically. 


CAPITAL  AND  LABOR 

LARGE  MANUFACTURING  ENTERPRISES  REQUIRE  THE  CO- 
OPERATION OF  THE  MOST  CAPABLE  AND  MOST  FAITHFUL 
EMPLOYEES— GENERAL  INCREASE  IN  WAGES  A  NATURAL 
CONSEQUENCE— LABOR'S  SHARE  IN  PROSPERITY 

Wages  a$  Affected  Fair  wages  and  steady  employment  for  the 
by  Trust  working  people,  who  constitute    an    over- 

Conditions  whelming  majority  of  the  community,  are 

the  imperative  conditions  of  a  common  prosperity. 
Whatever  can  contribute  to  that  end  is  engaged  in  an 
admirable  public  service.  Industry  in  the  United 
States  has  shown  a  remarkable  advance  in  these  re- 
spects during  the  hundred  years  and  more  of  its  con- 
tinuance. We  have  grown  to  be  a  wealthy  nation  and 
a  nation  of  contented,  prosperous  labor.  There  have 
been  periods  of  depression,  but,  on  the  whole,  progress 
has  been  steadily  onward  and  upward. 

The  effect  of  the  trust  movement  upon  wages  has 
been  variously  discussed,  and  some  divergent  conclu- 
sions have  been  reached  concerning  it.  In  many 
quarters  there  has  been  more  or  less  apprehension  that 
the  increased  strength  of  capital  brought  about  by  its 
consolidation  might  lead  to  a  tyrannous  exercise  of 
power  over  workingmen.  Should  this  apprehension 
prove  to  be  well  founded,  it  would  be  a  disaster,  com- 
pared with  whicn  all  the  other  advantages  derived 
from  the  economic  management  of  business  under 

113 


114  THE    OTHER    SIDE 


trust  conditions  would  fade  into  insignificance.  It  is 
reassuring  to  find,  therefore,  from  careful  investigation 
of  facts,  that  nothing  of  the  kind  has  occurred  or  is 
likely  to  transpire. 

_  Interesting    and    conclusive    figures    were 

Census  Figures 

Relating  to          given  in  the  United  States  census  of  1890, 
Industry  showing  the  expansion  of  industrial  occu- 

pations and  the  coincident  increase  in  wages.  These 
statistics  pertained  to  sixty-four  prominent  industries, 
such  as  boots  and  shoes,,  clothing,  cotton  goods, 
foundry  products,,  printing  and  publishing,  silk  and 
silk  goods,  lithographing  and  engraving,  plumbing 
and  gasfitting,  musical  instruments,  iron  work,  clay 
and  pottery  products,  and  so  on.  The  compilation  re- 
lated to  the  years  1880  and  1890  in  comparison. 

In  every  one  of  the  sixty-four  industries  there  was 
an  increase  in  the  number  of  laborers  employed  in 
1890,  above  those  employed  in  1880.  In  some  in- 
stances, the  increase  was  very  large,  being  as  high  as 
five  or  six  hundred  per  cent.  In  nearly  all  the  indus- 
tries the  number  of  employees  had  more  than  doubled. 
At  the  same  time  there  was  an  increase  of  wages  in 
every  pursuit  enumerated,  except  that  of  manufactur- 
ing watch  cases,  where  there  was  a  decrease  of  $8  per 
year  in  the  average  wages  paid. 

In  only  eight  of  the  industries  was  the  annual  in- 
crease of  wages  less  than  ten  per  cent.  The  lowest 
per  cent,  of  increase  was  in  the  electrical  apparatus 
and  supply  business,  which  showed  5.2  per  cent.,  and 
iron  and  steel  nail  manufacturing,  which  showed  5.8 
per  cent.  Only  five  other  occupations  showed  less  than 
a  twenty  per  cent,  increase.  In  the  remaining  fifty  there 
was  an  increase  ranging  from  21.8  to  82.2,  the  latter 


CAPITAL    AND    LABOR  115 

figures  being  attained  in  the  millinery  and  lace  goods 
business. 

There  was  an  increase  of  66.1  per  cent,  in  the  boot 
and  shoe  cut  stock  industry,  40.4  per  cent,  in  fancy 
and  paper  box  making,  49  per  cent,  in  brass  ware,  60 
per  cent,  in  men's  clothing,  69.3  per  cent,  in  women's 
clothing,  48.4  per  cent,  in  envelope  making,  47.8  per 
cent,  in  glass  cutting,  66.5  per  cent,  in  gloves  and 
mittens,  46.7  per  cent,  in  iron  work,  architectural  and 
ornamental,  53.3  per  cent,  in  jewelry  and  instrument 
cases,  62.4  per  cent,  in  lubricating  oil,  and  67.9  per 
cent,  in  watch  and  clock  materials. 
,  .  ..  This  table  shows  conclusively  that  improve- 

Improved  Manu-  • 

facturing  Methods  ments  in  manufacturing  methods  and  the  m- 
Benefit  Labor  troduction  of  labor-saving  machinery  have 
not  had  the  result  of  permanently  displacing  labor,  no 
matter  what  its  momentary  effect  in  individual  employ- 
ments may  have  been.  The  period  covered  by  these 
statistics  was  as  remarkable  as  any  decade  that  could 
have  been  chosen  for  its  readjustment  of  industry  to 
new  conditions,  principally  through  the  introduction 
of  improved  machinery.  Yet,  despite  that  influence, 
the  gross  amount  of  employment  was  increased  to  a 
remarkable  degree,  calling  for  the  services  of  a  larger 
number  of  working  people  than  had  ever  before  been 
engaged  in  these  occupations. 

More  than  that,  this  large  addition  to  the  army  of 
working  people  did  not  result  in  increased  compe- 
tition between  them  and  a  consequent  reduction  in 
wages.  On  the  contrary,  the  demand  for  labor  more 
than  kept  pace  with  the  supply  and  wages  advanced. 
At  the  same  time,  it  will  be  noted  by  those  who  will 
look  into  this  subject,  that  (although  this  particular 


116  THE    OTHER    SIDE 

point  is  not  treated  in  the  census  report)  a  further  ad- 
vantage accrued  to  the  workingmen  during  that  period 
through  a  reduction  in  the  hours  of  labor  in  very  many 
industries.  Labor-saving  machinery,  so  far  as  these 
statistics  show,  has,  therefore,  resulted  in  giving  em- 
ployment to  a  larger  number  of  people  at  increased 
wages  and  under  improved  conditions  of  work. 

Falling  Prices  In  l893  the  rePort  of  the  United  States  Sen- 
Associated  with  ate  in  relation  to  wages  and  prices  was 
High  Wages  given  out,  the  result  of  the  most  exhaustive 
investigation  into  the  subject  that  had  ever  been  made. 
This  report  reaffirmed  the  facts  set  forth  in  the  cen- 
sus report  of  1890,  and  the  conclusions  derived  there- 
from. In  agriculture,  stock  raising,  and  other  employ- 
ments where  labor-saving  machinery  has  been  least 
introduced,  the  prices  of  articles  produced  in  the 
period  from  1860  to  1891  generally  rose  from  thirty 
to  seventy  per  cent.,  and  in  several  instances  as  much 
as  100  per  cent.  Taking  those  pursuits  in  which 
labor-saving  machinery  has  been  considerably  intro- 
duced, the  table  presented  figures  of  140  groups  of 
manufactured  products.  All  these  showed  falling 
prices,  varying  from  six  to  forty  per  cent,  and  some 
of  them  as  high  as  seventy  per  cent. 

If  these  changes  in  prices  in  the  two  classes  of  indus- 
try— those  least  employing  and  those  most  employing 
labor-saving  machinery — had  been  associated  with 
corresponding  changes  in  relation  to  wages  and  con- 
ditions of  employment,  the  figures  might  not  be  so 
significant.  But  it  appears  that  the  lower  prices  in 
those  industries  that  have  most  availed  themselves  of 
labor-saving  machinery,  were  also  at  the  same  time 
accompanied  by  an  increase  in  the  number  of  laborers 


CAPITAL    AND    LABOR  HT 

employed    and    in    the   amount    and   rate   of   wages 
paid. 

From  1860  to  1891  average  wages  rose  sixty-eight 
per  cent.,  while  in  the  period  from  1840  to  1890  they 
rose  204  per  cent.  This  increase  was  accompanied  by 
a  decrease  in  prices  of  the  necessaries  of  life,  so  that 
the  purchasing  power  of  the  day's  work  increased  over 
seventy-two  per  cent.  The  introduction  of  labor-sav- 
ing machinery  gave  employment  to  a  larger  number 
of  working  people,  increased  the  rate  and  amount  of 
wages,  and  decreased  the  cost  of  living. 
Continued  Inv  The  dominance  of  amalgamated  capital 
i^Wa^Earner's  over  industry  has  in  nowise  retarded  the 
Conditions  progressive  advancement  of  the  working- 
man  as  respects  returns  for  his  labor.  The  facts  in  the 
case  are  simple  and  can  be  expressed  in  a  few  words. 
Wages  have  continued  to  rise  with  as  commendable 
regularity  since  the  trusts  became  a  factor  in  industry, 
as  they  did  before.  In  fact,  if  any  conclusion  can  be 
deduced  from  the  labor  experience  of  the  last  ten  years 
of  the  century,  it  is  that  the  workingman  has,  if  any- 
thing, profited  more  from  his  labor  where  he  has  been 
employed  in  industries  controlled  by  trust  organiza- 
tions than  in  any  other.  It  is  significant  that  the  trusts 
doing  the  most  successful  business  pay  the  highest 
wages,  and,  what  is  more  to  the  purpose,  they  pay 
these  wages  the  whole  year  around. 

Furthermore,  workingmen  thus  employed  have 
found  their  circumstances  so  satisfactory  that  they  are 
more  than  ever  contented,  which  everybody  recog- 
nizes is  a  common  good.  Many  strikes  were  inaugu- 
rated all  over  the  country  in  the  spring  of  1900.  None 
of  them  was  in  any  large  industry  dominated  by  trust 


118  THE    OTHER    SIDE 

organizations  of  capital,  and  few  of  them  in  any  indus- 
try even  indirectly  connected  with  trusts.  This  single 
fact  speaks  more  than  volumes  of  argument  concern- 
ing the  improved  relations  that  are  now  maintained 
between  the  workingman  and  amalgamated  capital. 

Coincident  with  the  recovery  of  business, 

Crtton  Mm*"  ^  after  l896'  from  the  stagnation  that  had 
long  preceded,  and  with  the  marvelous  ad- 
vancement in  all  branches  of  industry  in  the  United 
States,  has  come  an  equally  marked  and  gratifying  in- 
crease in  wages.  The  record  is  large  and  constantly 
growing.  It  would  require  many  pages  to  give  a  com- 
plete list  of  all  instances  of  such  improvement  in  labor 
conditions  at  the  end  of  the  century.  A  few  striking 
incidents  may  be  noted  as  illustrative  of  the  tendency 
of  the  day.  It  must  also  be  remembered  in  this  con- 
nection that  any  decided  increase  in  wages  in  one  in- 
dustry acts  directly  upon  all  other  lines  in  influ- 
encing similar  advances.  That  is  a  well  recognized 
economic  principle,  and  experience  has  proved  its  cer- 
tainty hundreds  of  times. 

One  of  the  most  notable  examples  of  the  increase  in 
wages  in  recent  times  was  that  secured  by  the  opera- 
tives in  the  textile  factories  of  Fall  River,  Mass.,  in 
1899.  There  an  advance  of  ten  per  cent,  was  secured 
after  some  controversy,  though  not  of  a  serious  char- 
acter, with  the  employers.  Most  of  the  cotton  and 
woolen  factories  throughout  New  England  followed 
the  example  of  those  of  Fall  River.  Fully  one  hun- 
dred and  fifty  thousand  employees  profited  by  this  ad- 
vance. Similar  action  was  taken  by  the  factories  in  the 
South,  where  some  twenty  thousand  operatives  were 
affected. 


CAPITAL    AND    LABOR  119 

About  the  same  time  there  were  consider- 
YorkState hTiSOO  a^e  wa£e  increases  on  the  part  of  some  of 
the  railroad  corporations,  the  window  glass 
manufacturers,  the  managers  of  the  carrying  trade  on 
the  great  lakes,  and  in  many  isolated  establishments 
throughout  the  country.  The  printing  trade  also  made 
demands  in  various  parts  of  the  United  States  for  a 
uniform  nine-hour  day,  and  was  generally  successful. 
The  growing  prosperity  of  labor  in  its  more  complete 
employment  and  in  its  better  wages  was  further  illus- 
trated by  figures  in  the  December,  1899,  bulletin  of  the 
Bureau  of  Labor  Statistics  of  New  York  State.  This 
showed  a  gain  in  the  membership  of  trade  unions 
from  188,455  on  June  30,  1899,  to  209,120  on  Septem- 
ber 30,  a  gain  that  would  not  have  come  save  from 
the  increased  prosperity  of  the  laborers.  It  is  a  well- 
known  fact  that  in  times  of  labor  depression  the  mem- 
bership in  labor  organizations  drops  off. 

During  the  period  covered  by  the  above  statistics,  a 
steady  increase  in  per  capita  earnings  all  along  the  line 
was  noted.  From  the  same  bulletin  it  appeared  that 
for  the  quarter  ending  June  30,  1899,  the  number  of 
unemployed  union  members  in  the  State  was  4,788; 
in  1898,  it  was  9,734;  in  1897,  it  was  10,893. 
..  .  In  February,  1900,  an  advance  of  twelve 

Wages  Made  by  per  cent,  was  made  in  the  wages  of  the  coke 
workers  in  the  Cornellsville  region  of  Penn- 
sylvania. This  was  in  addition  to  a  previous  advance 
that  had  been  made  in  May,  1899.  During  the  same 
time  the  industry  had  expanded  to  the  extent  of  twenty 
or  twenty-five  per  cent,  for  the  year,  and  a  proportion- 
ate number  of  additional  working  people  had  found 
employment.  The  increase  affected,  directly  or  in- 
directly, nearly  thirty  thousand  workers. 


W)  THE    OTHER    SIDE 

In  March,  1900,  the  employees  of  the  National  Tube 
Company  were  notified  of  a  ten  per  cent,  increase  in 
wages,  the  increase  affecting  over  twenty  thousand 
men  in  different  parts  of  the  United  States.  This  ad- 
vance followed  an  increase  of  ten  per  cent,  that  had 
been  given  less  than  six  months  previously,  the  action 
of  the  company  being  voluntary  in  both  instances. 
Thus  the  wages  of  labor  in  that  industry  became  higher 
than  at  any  previous  time  in  the  history  of  the  works. 
Also  in  March,  1900,  the  wages  of  the  workers  in  the 
Illinois  coal  mines  were  advanced  at  the  same  time 
that  an  eight-hour  working  day  was  inaugurated.  The 
new  schedule  provided  for  advances  averaging  some 
twenty  per  cent,  in  all  the  different  lines  of  employment 
in  the  mines. 

These,  that  have  been  enumerated,  are  but  isolated 
instances.  A  complete  compilation  of  all  the  increase 
of  wages,  especially  of  those  in  industries  where  the 
consolidation  of  capital  has  been  most  pronounced, 
will,  when  it  is  made,  present  some  astounding  figures 
that  must  forever  put  at  rest  the  implication  that  there 
is  any  danger  in  trusts  to  the  workingman,  either  in 
permanent  loss  of  employment,  reduction  of  wages,  or 
in  the  general  conditions  pertaining  to  his  social  or  in- 
dustrial status.  It  will  be  shown  that  labor  has 
received  a  substantial  share  of  the  profits  that  have 
resulted  from  the  establishment  of  improved  methods 
of  working  under  the  new  system  of  industry. 

Increased  Oppor-  Tt  is  nOt  alone  the  <luestion  of  wa£es  that 
tunities  for          interests  the  employed  class.    It  is  the  ques- 

•    • 

tion  of  permanent,  agreeable  employment, 
and  of  opportunities  for  advancement.  Under  the 
trust  system  this  is  more  certainly  assured  than 


CAPITAL    AND    LABOR  181 

under  the  previous  system  of    smaller    independent 
producing  concerns. 

The  magnitude  of  the  business  controlled  by  amal- 
gamated capital  in  every  particular  instance  demands 
for  its  successful  direction  talent  of  the  highest  order, 
as  well  as  the  perfection  of  labor.  In  small  corpora- 
tions, employment  either  in  production  or  administra- 
tion may  go  largely  by  favor.  Family  interests  may 
considerably  influence  the  employment,  especially  in 
the  case  of  those  engaged  in  the  administrative  de- 
partment of  the  business.  There  is  always  a  tendency 
to  keep  the  control  of  affairs  in  the  hands  of  the  few 
who  have  been  most  closely  identified  with  it,  often 
from  its  beginning. 

In  the  case  of  the  trust  there  is  no  such  sentiment. 
The  business  is  compelled,  by  the  very  condition  of  its-. 
existence,  largely  to  ignore  personality.  It  must  hav« 
as  nearly  perfect  methods  of  production  and  perfect 
administration  as  it  is  possible  to  get  from  the  genius 
of  men.  The  young  man  of  capacity,  ambitious  of  his 
future,  has  more  opportunity  with  a  trust  organization 
than  with  any  other  concern.  A  question  of  ability 
is  almost  the  only  thing  thought  worthy  of  considera- 
tion. He  who  shows  himself  equal  to  the  demands  of 
business  about  him  or  above  him  is  more  eagerly 
sought  after  under  the  trust  system  than  ever  before. 
Displacement  of  Undoubtedly,  the  readjustment  of  industrial 
Labor  Not  a  conditions,  in  whatsoever  form  it  may  come, 
Permanent  Evil  results  in  the  temporary  displacement  of 
labor.  That  has  been  the  invariable  accompaniment 
of  all  industrial  progress. 

When  machinery  was  introduced  in  cotton  manu- 
facturing at  first  it  took  away  employment  from  many 


183  THE    OTHER    SIDE 

individual  workers  who  had  previously  performed 
their  tasks  in  their  own  homes.  Ultimately,  however, 
the  added  efficiency  derived  from  the  use  of  machinery 
developed  the  amount  of  production  and  increased 
consumption.  Step  by  step,  and  finally,  with  enormous 
rapidity,  the  demand  for  labor  grew  beyond  anything 
that  had  ever  before  been  known  in  the  industries 
directly  involved.  In  the  course  of  time  great  improve- 
ments were  made  in  the  machinery,  so  that  one  ma- 
chine was  able  to  do  the  work  that  had  previously  been 
done  by  many  hands.  Men,  women  and  children  were 
thrown  out  of  employment,  but  it  was  not  long  before 
the  former  process  was  repeated,  and  the  laborers  who 
had  been  deprived  of  work  for  the  moment  found 
themselves  re-employed  in  the  same  or  some  asso- 
ciated industry,  while  many  more  received  employment 
than  had  ever  found  place  before. 

That  has  been  the  history  of  every  movement  in 
industrial  progress.  At  the  beginning  there  has  been 
some  displacement  of  labor,  some  disturbance  in  the 
condition  of  things  previously  prevailing,  but,  in  the 
end,  there  has  been  more  employment  and  higher 
wages. 

The  student  of  economic  and  industrial  his- 

EconomlSw  tory  wil1  readilv  reca11  the  excitement  that 
prevailed  in  England  when  steam  looms 
and  spinning  jennies  were  introduced.  The  workmen 
who  were  displaced  organized  mobs  and  went  about 
destroying  the  machines  in  order  that  they  might  not 
be  deprived  of  the  opportunity  of  making  their  living. 
At  that  time  the  spinners  and  weavers  in  England 
numbered  less  than  8,000.  Before  the  next  decade  had 
passed,  the  very  machines  that  were  thus  condemned 


CAPITAL    AND    LABOR  123 

were  furnishing  employment  to  more  than  350,000 
persons.  At  the  end  of  the  nineteenth  century  over 
2,000,000  people  in  England  alone  earned  their  living, 
directly  or  indirectly,  through  the  same  instrumentali- 
ties. 

Hundreds  of  examples  of  this  economic  law  will 
doubtless  occur  to  everyone.  In  the  United  States  we 
have  been  peculiarly  situated,  by  reason  of  our  natural 
resources,  and  through  our  natural  mechanical  genius, 
which  has  enabled  us  to  develop  machinery  and  ma- 
chinery methods  to  an  extent  unequaled  in  any  other 
part  of  the  world.  Again  and  again  it  has  happened 
to  us,  in  many  an  industry,  to  practically  repeat  the 
experience  of  England  in  cotton  manufacturing. 

An  Example  from  Take  PrintinS  ^  publishing  for  example. 

the  Printing  When  the  power  press  superseded  the  little 
hand  press  of  a  century  ago,  the  same 
dreadful  results  were  predicted  from  it,  because  it  threw 
out  of  employment  many  hand  workers,  on  account  of 
its  increased  facility.  When,  from  time  to  time,  im- 
proved presses  were  introduced,  labor  was  still  further 
displaced,  one  man  being  able  to  do  the  work  that 
previously  had  devolved  upon  several.  In  the  Mer- 
genthaler  Linotype  machine  came  another  great  revo- 
lution. These  machines  do  the  work,  each  one,  of  many 
hand  compositors.  Of  course,  printers  were  thrown 
out  of  employment,  just  as  many  pressmen  were  years 
before. 

What  was  the  ultimate  result,  however?  Almost 
before  the  perfecting  presses  came  into  general  use, 
and  before  it  was  possible  to  equip  all  the  large  print- 
ing offices  in  the  country  with  type-setting  machines, 
labor  conditions  in  the  industry  began  to  feel  the 


184  THE    OTHER    SIDE 

effect  of  improved  conditions.  By  the  added  and 
cheaper  facilities,  afforded  through  the  instrumentality 
of  the  new  machines,  manufacturers  were  able  to 
attain  greater  efficiency  at  a  lessened  cost  of  produc- 
tion. Consumption  increased  even  more  rapidly  than 
facilities  could  be  devised  to  meet  it.  A  demand  for 
the  employment  of  labor  beyond  everything  that  had 
been  known  previously  in  the  industry  sprang  up. 
More  than  that;  the  influence  reacted,  as  it  must  always 
do,  upon  other  industries  allied  in  some  way  or  other 
to  this  particular  one.  As  a  secondary  result,  employ- 
ment was  furnished  indirectly  to  many  wage-earners 
who  might  otherwise  have  found  it  more  difficult  to 
secure  a  share  in  general  prosperity.  The  working- 
men  that  have  had  employment,  directly  or  indirectly, 
through  the  introduction  of  this  labor-saving  machin- 
ery in  the  printing  business  are  infinitely  more  numer- 
ous than  those  that  were  in  the  beginning  displaced. 
The  advance  in  wages  that  has  also  accrued  therefrom 
has  been  substantial. 

Labor  Displace.     What  haS  been  tfUe  °f   ever^  Other   £reat 
ment  Under  Con-  industrial  movement  may  also    be    confi- 
solidated  Capital  dently  accepted  as  an  outcome  of  the  nine- 
teenth century  revolution  of  capital.    Indispensable  to 
consolidated  capital  is  its  increased  efficiency  through 
economy  of  production  and  administration.    The  de- 
sire to  reduce  expenses  has  been  a  controlling  influ- 
ence in  this  amalgamation  of  capital,  as  distinguished 
from  the  pools  and  syndicates  that  strove  only  to  in- 
crease prices. 

Reduction  of  expenses  means  saving  in  purchases; 
the  doing  of  large  business  instead  of  small  business 
at  practically  the  same  cost  in  money  and  effort2  and 


CAPITAL    AND    LABOR  186 

the  discharge  of  some  workingmen  and  other  em- 
ployees. Without  such  economy  a  substantial  part  of 
the  reason  for  the  organization  of  these  large  corpora- 
tions would  not  exist.  Accordingly,  in  some  instances, 
employees  have,  for  the  time  being,  been  displaced. 
This  has  been  particularly  noticeable  in  the  case  of 
the  traveling  salesman.  Several  thousands  of  these 
employees  have  found  themselves  deprived  of  their 
situations.  The  concerns  that  they  so  long  represented 
in  the  sharpest  kind  of  competition  are  no  longer  com- 
peting, but  are  doing  business,  so  far  as  selling  is  con- 
cerned, in  simpler  and  less  expensive  ways,  and  at  a 
cost  of  the  services  of  one  or  two  men  for  the  combined 
business,  where  formerly,  perhaps,  scores  were  en- 
gaged. Nevertheless,  the  ultimate  result  can  be  pre- 
dicted with  the  fullest  confidence.  Those  who  have 
been  displaced  will  soon  find  greater  opportunities 
than  ever  before  existed  for  the  exercise  of  their  tal- 
ents. Thus  in  the  end,  what  may  seem  to  be  a  present 
hardship,  will  prove  to  be  a  substantial  and  lasting 
advantage. 

Trusts   are   labor-saving    devices.      Large 
Labor  Will  Always  corpOrations,  aiming  primarily  at  economy 

of  production,  must  have  the  best  labor,  no 
less  than  the  best  machinery.  Every  manufacturer 
knows  that  there  is  no  economy  to  him  in  worn-out 
or  out-of-date  machinery.  Even  though  the  initial  cost 
of  new  and  improved  machines  may  be  heavy,  he  is 
obliged  to  have  them,  in  order  to  secure  the  greatest 
efficiency  for  his  establishment,  so  as  to  meet  the  daily 
demands  of  the  market  and  the  competition  of  his 
rivals. 

What  is  true  of  inanimate  machinery  is  just  as  true 


188  THE    OTHER    SIDE 

of  the  human  machinery  in  the  form  of  working  peo- 
ple. Poor  labor  is  always  expensive  labor.  Labor 
that  is  most  intelligent  and  most  capable  is,  in  the  end, 
cheapest,  even  though  it  is  higher  priced.  The  man- 
agers of  trusts  not  only  recognize  this  fact,  but  they 
accept  it  as  an  imperative  condition  of  doing  successful 
business. 

We  have  seen  the  demand  for  labor  improved  and 
wages  increased  in  all  the  leading  industries  of  the 
country  during  the  decade  from  1880  to  1890.  Offi- 
cial statistics  have  not  as  yet  been  compiled  covering 
the  subsequent  ten  years,  but  there  can  be  no  possible 
doubt  that  they  will  show  a  continuance  of  the  same 
state  of  affairs.  Workingmen  and  others  who  have 
kept  watch  of  the  movement  in  industry  during  the 
last  ten  years  of  the  century,  know  that  the  conditions 
of  labor  have  generally  improved,  so  that  now  they  are 
infinitely  better  than  they  were  in  1890,  while  wages 
have  increased  during  the  same  period.  That  the  cen- 
sus returns  of  1900  will,  in  this  respect,  reinforce  those 
of  1890,  scarcely  admits  of  doubt. 


RECOGNITION  OF  ORGANIZED  LABOR 

TRADE  UNIONS  NECESSARY  TO  THE  PROSPERITY  OF  THE 
WORKINGMAN  AND  ADVANTAGEOUS  TO  THE  EMPLOYER- 
MODERN  INDUSTRIES  DEPENDENT  UPON  UNITED  LABOR  IN 
CONJUNCTION  WITH  UNITED  CAPITAL. 

TheWorkingman'sIn  the  conditions  tha*  Pert*in  to  modern 
Right  to  industry,  organization  on  the  part  of  the 

Organize  wage-earner  has  become  indispensable.    It 

is  more  than  his  privilege,  more  than  his  right.  It  is 
his  necessity;  an  imperative  essential  in  securing  for 
him  the  protection  and  the  material  and  permanent 
advancement  to  which  as  a  component  part  of  the 
world's  great  army  of  toilers  he  is  fully  entitled.  Nor 
does  this  concern  him  alone.  It  substantially  contrib- 
utes as  well  to  the  business  advantage  of  the  employing 
class  and  to  the  prosperity  of  the  general  public  that 
can  be  best  served  only  by  the  existence  of  harmoni- 
ous relations  between  capital  and  labor. 

There  is  no  longer  serious  dispute  about  the  truth 
of  this  proposition.  Both  employers  and  employees 
recognize  it  and  concede  its  force.  It  is  true  that 
a  few  economic  students  still  persist  in  arguing  the 
contrary  and  in  proclaiming  against  what  they  call 
"the  tyranny  of  organized  labor."  Now  and  then  also 
some  large  corporation  may  make  a  determined  but 
ineffectual  stand  against  the  recognition  of  a  trade 
union.  These  manifestations,  alike  the  theoretical  and 

127 


138  THE    OTHER    SIDE 

the  practical,  are,  however,  comparatively  few  nowa- 
days, and  are  becoming  less  and  less  frequent  every 
year.  They  are  but  echoes  of  the  old-time  feeling  and 
opinion  that  has  well-nigh  disappeared ;  the  last  feeble 
struggles  against  the  momentum  of  an  inexorable 
force. 
n  The  laws  of  the  economic  world  are  as 

Organization  the 

Basis  of  All        resistless  as  the  law  of  gravitation  or  the 
Prosperity  jaws  of  evoiution.    The  famous  laws  of  the 

Medes  and  the  Persians  were  but  as  straw  compared 
with  them.  Opposition  to  them  is  as  futile  as  would 
be  opposition  to  any  other  laws  of  nature.  Then  as 
well  think  of  turning  the  course  of  an  Alpine  ava- 
lanche as  to  hope  for  a  successful  opposition  to  the 
principle  of  organized  labor.  It  would  be  far  easier  to 
sweep  back  the  billows  of  the  Atlantic  with  Mrs.  Par- 
tington's  broom.  All  industrial  progress  that  has  beer, 
worth  a  thought  and  every  step  that  the  human  race 
has  made  toward  higher  civilization  has  always  been 
accompanied  by  organization ;  in  fact,  it  has  only  been 
through  and  by  reason  of  that  influence  that  civiliza- 
tion has  ever  made  any  substantial  advancement. 
Unorganized  effort  has  never  accomplished  great 
results  in  the  material  fields  of  human  activity. 

Disappearance      As  an  economic    factor    the    independent, 

of  the  Individual  individual  worker    in    large    and  complex 

Worker  industries  no  longer  exists;  from  the  very 

nature  of  things  he  cannot  ever  again  exist.    He  has 

forever  disappeared  along  with  the  home  loom  and 

spinning  wheel,  the  family  knitting  needles,  and  the 

shoemaker's  bench  beside  the  kitchen  fire-place.    The 

introduction  of  machinery,  the  utilization  of  steam, 

and    the    consequent    development    of    the    factory 


RECOGNITION    OF    ORGANIZED    LABOR  129 

wrought  a  radical  change  in  the  status  of  the  working- 
man.  From  that  moment,  the  individual  laboring  by 
himself,  and  for  himself  in  full,  free  competition  with 
all  others,  and  without  consideration  for  the  interests 
of  his  fellows,  became  an  economic  impossibility.  The 
movement  thus  initiated  for  gathering  single  workers 
into  classes  has  gone  forward  as  steadily  and  relent- 
lessly as  the  ice  pack  of  the  glacial  epoch  moved  over 
the  continent  in  ages  gone  by,  until  now  the  individual 
producer  has  been  practically  eliminated  and  has  fallen 
into  place  simply  as  a  unit  of  a  great  industrial  system. 
To  be  sure,  the  individual  still  retains  his  personal 
ascendency  in  agriculture,  seafaring  and  some  other 
occupations,  but  that  is  all.  In  most  employments  the 
type  of  industry,  the  methods  of  working,  and  the 
social  life  of  the  laboring  class  have  been  completely 
revolutionized. 

Out  of  these  changed  conditions  the  devel- 
Common 

Conditions  of       opment  of  organized  labor  into  guilds,  trade 
Labor  unions  and  other  associations  of  like  charac- 

ter and  purpose  has  come  naturally  and  imperatively. 
Professor  George  Gunton,  in  a  lecture  upon  The 
State's  Relation  to  Labor,  has  clearly  presented  the 
case  in  these  words :  "The  great  factory  methods  have 
made  the  organization  of  production  inevitable,  by 
which  all  laborers  in  a  given  industry  must  work  under 
common  conditions  as  to  hours  of  labor,  wages  and 
sanitary  conditions  of  various  kinds.  This  is  no  longer 
at  the  individual  option  of  either  the  employer  or  the 
laborer.  Bricklayers  are  a  group.  They  must  act  in 
common  or  not  at  all.  Carpenters,  weavers,  shoe- 
makers, tailors,  are  groups ;  they  are  parts  of  an  indus- 
trial mail,  not  complete  industrial  individuals,  They 


130  THE    OTHER    SIDE 

never  can  be  that  without  returning  to  the  simple 
methods  of  hand  labor  and  relative  barbarism." 

_    .    „  ,  Nothing  more  disastrous  to  the  cause  of 

Trade  Unions 

Must  Not  Be        business  as  well  as  to  labor  could  occur 

Destroyed  than  to  have  the  trade  unions  overcome 

and  destroyed.  Now  the  natural  and  orderly  methods 
of  trade  unionism  contribute  to  successful  industry. 
With  all  their  faults — and  even  their  most  earnest  sup- 
porters concede  that  they  have  faults — they  serve 
society  well.  Without  them  labor  would  be  com- 
pletely disorganized  and  industry  paralyzed;  chaos 
would  follow. 

The  discontent  and  uneasiness  of  labor  which  is  now 
controlled  and  directed  in  ways  that  work  out  its  own 
good  would  be  under  no  restraint.  They  might  even 
find  ultimate  expression  through  the  wild  and  revolu- 
tionary uprisings  of  despairing  men  that  would  shake 
the  very  foundations  of  society,  and,  for  the  time  being, 
completely  overthrow  all  industry,  putting  the  world 
back  generations  in  the  march  of  progress.  Professor 
John  Graham  Brooks  has  well  said:  "If  the  growth  of 
the  trust  would  end  in  the  crushing  of  the  unions  it 
would  be  a  great  human  tragedy." 

Recognition  of     Since;  then'  organization    has    become   to 
Organized  Labor  labor  a  condition  precedent  to  prosperity, 
a  Necessity          an(j  a  means  of  industrial  self-protection, 
the  question  of  the  attitude  of  trusts  toward  united 
labor  is  of  the  greatest  importance.    It  concerns  not 
the  workingman  alone  and  his  trust  employers.     It 
touches  the  most  vital  interests  of  the  entire  com- 
munity.    It  affects  thousands  of  small  employers  in 
industries  outside  the  great  trusts.    It  appeals  forcibly 
to  unorganized  labor.     It  involves  the  welfare  of  the 


RECOGNITION    OF    ORGANIZED    LABOR  181 

entire  consuming  public  even  more  than  it  does  that  of 
any  special  class. 

Perhaps  it  is  too  early  to  answer  this  question 
authoritatively  and  conclusively.  Much  light  can,  how- 
ever, be  thrown  upon  it.  No  one  will  venture  to  dis- 
pute that  thus  far  in  the  history  of  industrial  combi- 
nations, workingmen,  concurrently  with  the  growth 
of  capitalistic  concentration,  have  secured  higher 
wages  and  shorter  hours,  better  treatment  at  the  hands 
of  employers,  and  more  consideration  individually  and 
collectively. 

But  there  is  a  point  beyond  this  to  which  organized 
workingmen  instinctively  go.  With  them  improved 
means  of  protection  is  more  vital  than  improved  meth- 
ods of  production,  important  as  the  latter  are.  They 
want  some  say  regarding  terms  of  employment.  Even 
though  the  trusts  may  concede  higher  wages  and 
shorter  hours,  it  is  the  recognition  of  the  right  to  make 
terms  through  the  agency  of  the  union  that  concerns 
them  most. 

A ....   .  There  is  no  evidence  that  the  trust  operators 

Attitude  of  the 

Trusts  Generally   have  any  inclination  to  take  a  contrary  view 

Favorable  of  t|ie  case  NOW  an(j  then,  ft  is  true,  dis- 

tinct warfare  has  been  made  upon  the  unions,  as  for 
instance  in  the  great  Carnegie  conflict  that  culminated 
in  the  Homestead  riots  of  1892.  On  the  whole,  how- 
ever, no  more,  and  even  perhaps  less  of  this  disposition 
is  manifested  on  the  part  of  the  trust  organizations  than 
has  been  heretofore  exhibited  by  smaller  corporations 
and  individual  employers.  The  growing  tendency  of 
modern  times  has  been  steadily  toward  the  recognition 
of  the  trade  union  as  an  irrefutable  and  permanently 
established  factor  in  the  industrial  problem.  Not  even 


188  THE    OTHER    SIDE 

the  power  of  all  trusts  combined  can  turn  back  this 
wheel  of  progress. 

Organized  capital  must  largely  depend  upon  organ- 
ized labor.  Concentration  of  labor  and  concentration 
of  capital  go  hand-in-hand  as  co-ordinate  means  of  in- 
dustrial efficiency.  A  quarter  or  a  third  of  a  century 
ago  it  was  possible,  if  not  wise,  for  employers  to  treat 
with  their  workingmen  as  individuals.  That  is  less 
practicable  now,  and  in  a  few  years  will  be  wholly  im- 
possible. Just  as  the  corporation  has  taken  the  place 
of  the  individual  employer  so  has  the  union  succeeded 
to  the  individual  workingman,  while  industry  has 
gradually  reorganized  in  accordance  with  the  new 
order  of  things. 

The  plain  fact  is  that  the  growth  of  the  large  cor- 
poration has  strengthened  the  position  of  organized 
labor.  Large  corporations  with  millions  of  dollars  of 
capital  involved,  and  great  interests  at  stake,  are  in  a 
way  even  more  dependent  upon  it  than  are  smaller 
concerns  with  restricted,  and  sometimes  only  local 
spheres  of  activity.  Stability,  smoothness  and  regu- 
larity of  industrial  procedure  are  fundamental  to  their 
prosperous  existence.  Deprived  of  these,  they  are 
handicapped  at  the  outset  in  the  contest  for  supremacy 
in  the  marts  of  the  world.  So  fully  is  this  recognized 
that  some  observers  have  already  begun  to  predict  that 
in  the  course  of  time  there  will  be  the  closest  alliance 
between  organized  capital  and  organized  labor. 
Real  Interests  of  ^  *s  sometimes  asserted  that  the  conditions 
the  Workingman  surrounding  employment  in  large  corpora- 
tions tend  to  destroy  the  laborer's  liberty 
and  individuality  by  making  him  merely  part  of  a 
productive  machine.  In  a  certain  sense,  as  has  already 


RECOGNITION    OF    ORGANIZED    LABOR  138 

been  pointed  out,  the  individual  laborer  has  really  dis- 
appeared from  the  field  of  industry,  and  has  become 
merely  a  unit  of  a  system,  a  part  of  some  trade  union  or 
other  association  of  like  character.  Nevertheless,  he 
has  gained  more  for  himself  by  the  change  than  he  has 
lost.  His  entire  independence  as  a  worker  has,  it  may 
be  admitted,  forever  gone.  That  the  possibility  of  im- 
provement in  his  individual  circumstances  and  his  in- 
dividual power  has  also  been  lost  is  a  mere  phantom 
of  the  imagination. 

No  result  could  be  more  contrary  to  the  working  of 
the  whole  system  of  modern  wage  labor.  Before  the 
wage  system  began,  laborers  had  less  freedom  and  less 
individuality  than  they  have  since  had.  Not  until  long 
after  the  wage  system  came  did  they  acquire  any  lib- 
erty, political  rights,  or  social  individuality.  By  com- 
bination with  their  fellow-laborers,  and  by,  to  a  certain 
extent,  yielding  their  individuality  to  an  aggregation 
for  the  mutual  benefit  of  the  whole,  they  have  practi- 
cally strengthened  and  reinforced  each  individuality, 
and  secured  other  advantages  besides.  In  respect  to 
wages,  hours  of  labor,  social  and  political  influence,  the 
workingmen  in  those  branches  of  labor  that  are  organ- 
ized have  achieved  more  for  themselves  than  those  in 
any  other  group,  as,  for  instance,  agriculture. 

Freedom  and  individuality  on  the  part  of 
Things  Secured  * 

fromConcen-  the  laborer  depend  upon  two  things,  per- 
trated  Capital  rnanence  of  employment  and  good  wages. 
Wherever  employment  is  most  permanent,  and  wages 
are  highest,  there  labor  is  most  intelligent,  has  the 
greatest  freedom,  and  the  strongest  individual  iden- 
tity. Labor  organizations  incontestably  tend  to  this 
condition  of  affairs;  and  it  is  equally  true  that  where 


134  THE    OTHER    SIDE 

capital  is  small  and  employers  are  poor,  less  can  be 
accomplished,  even  through  organization,  to  improve 
the  condition  of  the  employed.  No  heed  how  strong  a 
union  may  be,  it  cannot  so  easily  prevail  against  a 
small  employer  who  is  financially  unable  to  accede  to 
its  wishes  as  it  can  with  the  larger  corporation,  which 
not  only  can  make  the  concessions  that  may  be  asked 
for,  but  also  finds  it  to  advantage  so  to  do. 

Experience  has  demonstrated  that  this  is  the  way  the 
proposition  works  out  in  actual  practice.  Where  large 
corporations  exist  and  deal  with  organized  labor, 
wages  are  highest,  and  employment  most  continuous. 
In  many  instances  this  is  because  the  highest  degree  of 
productive  economy  and  the  highest  efficiency  are 
more  effectually  guaranteed  through  the  operations  of 
organized  labor  than  they  would  be  in  dealing  with  in- 
dividual and  competing  workers.  In  other  cases  the 
result  has  been  secured  either  because  the  trade  union 
has  been  strong  enough  to  enforce  its  demands  or 
because  the  corporation  fearing  the  exercise  of  that 
influence  has  anticipated  its  wishes  by  voluntarily  mak- 
ing the  concessions  desired.  Whichever  way  it  is,  the 
power  of  the  trade  union  is  the  factor  that  has  brought 
it  about,  and  none  is  more  ready  to  acknowledge  this 
than  managers  of  enterprises  that  are  supported  by 
combinations  of  capital. 

Possible  Advan.     On  the  whole>  perhaps,  it  might  not  be  alto- 
tages  from  Oppo.  gether  to  the  disadvantage  of  united  labor 
sition  of  Capital    jf  consolidated  capital  should  manifest  some 
degree  of  opposition  to  its  organization.  In  such  a  con- 
tingency theworkerswould  be  stimulated  and  strength- 
ened.    They  would  be  inspired    to    renewed    efforts 
to  maintain  themselves  in  the  rights  they  have  already 


RECOGNITION    OF    ORGANIZED    LABOR  136 

secured,  and  in  the  preservation  of  their  organized 
existence.  Years  of  struggle  and  sacrifice  made  for 
economic  independence  have  trained  and  nerved  the 
American  toiler  for  greater  trials  than  he  has  ever 
passed  through  before,  if  those  must  needs  come. 

Every  indication  at  the  present  time  now  argues 
against  any  such  possibility.  The  contest  between 
organized  labor  and  organized  capital  may  at  times  be 
severe,  but  it  is  not  likely  to  be  serious.  If  it  shall  be 
strong  enough  to  keep  the  workingman  constantly 
spurred  up  to  safeguard  his  interests,  it  would  be  a 
wholesome  advantage  to  both  sides  of  the  controversy. 
In  this  connection  it  is  instructive  to  listen 

SborUaderi  to  the  declarations  of  representatives  of 
united  labor.  Naturally,  they  understand 
the  situation  better  than  any  outsiders.  The  sentiments 
of  the  working  people  control  their  judgments,  and 
they  have  a  thorough  practical  knowledge  of  the  defi- 
nite effect  of  the  actual  workings  of  any  plan  or  plans 
that  touch  wages  or  the  welfare  of  their  organizations. 
Labor  is  particularly  wideawake  in  these  days  regard- 
ing its  interests,  and  is  quick  to  take  alarm  at  anything 
that  seems  even  indirectly  to  be  to  its  disadvantage. 
If  there  is  anything  in  the  trust  movement  that  seems 
likely  to  inflict  injury  upon  united  labor  the  working- 
man  can  be  safely  depended  on  to  realize  it.  There- 
fore, the  expressed  opinions  of  labor  dealers  must  be 
recognized  as  exceptionally  important. 

Several  of  those  who  are  especially  entitled  to  speak 
for  labor  were  present  at  the  Chicago  Conference  on 
Trusts,  and  their  utterances  attracted  more  than  ordi- 
nary attention.  If  any  expectation  had  been  raised  con- 
cerning their  possible  attitude  on  the  subject  it  was  that 


186  THE    OTHER    SIDE 

they  would  be  found  arrayed  strongly  in  opposition  to 
capital  in  whatever  form  it  might  appear.  On  the  con- 
trary, however,  they  agreeably  surprised  their  hearers 
by  frankly  and  fearlessly  placing  themselves  at  the  out- 
set in  the  position  of  conceding  that  large  aggregations 
of  capital  are  inseparable  from  modern  industry. 
Starting  from  this  premise  they  did  not  attempt  to  cry 
down  the  trust,  but  took  the  high  and  wholly  de- 
fensible ground  that  the  only  thing  to  be  considered 
was  how  combinations  of  capital  may  be  treated  with 
or  directed  so  as  to  be  serviceable  to  the  workers  as 
well  as  to  the  employers. 

Samuel  Gompers,  president  of  the  Ameri- 

State  Interference  can  Federation  of  Labor,  said: 

Not  Called  for 

But  organized  labor  looks  with  appre- 
hension at  the  many  panaceas  and  remedies  offered  by 
theorists  to  curb  the  growth  and  development  or 
destroy  the  combinations  of  industry.  We  have  seen 
those  who  know  little  of  statecraft  and  less  of  econ- 
omics urge  the  adoption  of  laws  to  'regulate'  interstate 
commerce  and  laws  to  'prevent'  combinations  and 
trusts,  and  we  have  also  seen  that  these  measures,  when 
enacted,  have  been  the  very  instruments  employed  to 
deprive  labor  of  the  benefit  of  organized  effort,  while 
at  the  same  time  they  have  simply  proved  incentives 
to  more  subtly  and  surely  lubricate  the  wheels  of  capi- 
tal's combination.  For  our  part,  we  are  convinced  that 
the  State  is  not  capable  of  preventing  the  legitimate 
development  of  natural  concentration  of  industry.  All 
the  propositions  to  do  so  which  have  come  under  our 
observation  would  beyond  doubt  react  with  greater 
force  and  injury  upon  the  working  people  of  our  coun- 
try than  upon  the  trusts.  *  *  *  There  is  no  ten- 


RECOGNITION    OF    ORGANIZED    LABOR  187 

derer  or  more  vulnerable  spot  in  the  anatomy  of  trusts 
than  their  dividend-paying  function;  there  is  no  power 
on  earth  other  than  the  trade  unions  which  wields  so 
potent  a  weapon  to  penetrate,  disrupt,  and,  if  necessary, 
crumble  the  whole  fabric.  This,  however,  will  not  be 
necessary,  nor  will  it  occur,  for  the  trade  unions  will  go 
on  organizing,  agitating  and  educating,  in  order  that 
material  improvement  may  keep  pace  with  industrial 
development,  until  the  time  when  the  workers,  who 
will  then  form  nearly  the  whole  people,  develop  their 
ability  to  administer  the  functions  of  government  in 
the  interest  of  all." 

In  conclusion,  he  ventured  the  prediction  that  there 
would  be  "no  cataclysm,  but  a  transition  so  gentle  that 
most  men  will  wonder  how  it  all  happened." 

Henry  White,  of  New  York,  general  secre- 

The  Trusts' Great  t  f  th     United  Garment  Workers    of 

Opportunity  * 

America,  also  took  a  conservative  position 

in  regard  to  the  subject.    He  said : 

"The  industrial  combinations  known  as  trusts  have  so 
entrenched  themselves  in  our  economic  system,  that  it 
is  not  so  much  a  question  now  as  to  how  they  can  be 
suppressed,  but  what  the  public  attitude  should  be 
toward  them,  and  whether  or  how  they  should  be  regu- 
lated for  the  public  benefit.  They  are  already  a  phase 
of  our  industrial  development,  and  being  here  have  at 
least  some  presumption  in  their  favor,  but  they  are  not 
yet  sufficiently  established  to  give  them  the  sanction  of 
time  and  experience.  They  have  just  forced  their  way 
into  the  arena  of  public  activity.  The  benefits  derived 
by  the  community  from  them  still  requires  demonstra- 
tion, likewise  adequate  proof  as  to  the  dangers  attend- 
ing their  existence. 


138  THE    OTHER    SIDE 

"Simply  citing  cases  showing  abuses  is  no  indict- 
ment against  the  method  itself.  We  must  distinguish 
between  the  use  and  abuse  of  a  thing,  otherwise  no 
human  institution  could  stand.  Discrimination  is  the 
soul  of  an  argument.  While  pointing  out  the  evils  of 
trusts  we  must  not  forget  the  serious  grievances  of 
competitive  business — its  limitations,  its  wastes,  its 
uncertainties.  Workingmen  are  only  too  familiar  with 
the  disheartening  reply  when  asking  for  an  increase  of 
wages,  'Can't  afford  it  on  account  of  competition.'  The 
trust  method,  at  least,  changes  that  situation  so  far  as 
ability  to  concede  better  conditions  are  concerned." 

Mr.  White  declared  his  belief  that  the  real 

Trade  Unions  Not  reason  why  trusts  have  grown  so  wonder- 
Opposed  to  Trusts  * 

fully  is  because  of  the  American  genius  for 

doing  things  on  a  large  scale,  and  not  because  of  favor- 
ing legislation,  tariffs,  discriminating  railroad  rates  or 
other  things  commonly  ascribed.  He  was  confident 
that  "as  soon  as  present  industrial  tendencies  have 
evolved  from  their  present  formative  state,  there  can 
be  no  doubt  that  the  American  spirit  of  rivalry  would 
assert  itself  in  competition  between  great  combina- 
tions" as  it  has  before  existed  between  the  smaller  cor- 
porations. 

Touching  upon  the  feeling  of  trade  unions,  he  said: 
"I  feel  justified  in  saying  that  the  general  attitude  of 
the  trade  unions  toward  the  industrial  corporations  is 
neither  trust  nor  anti-trust.  They  have  a  position  of 
their  own.  They  are  not  making  any  leaps  in  the  dark. 
Hard  experience  has  taught  them  caution.  Trade 
unions,  the  creation  of  modern  social  evolution,  have 
no  quarrel  with  the  progressive  forces  in  society,  but 
they  demand  for  the  workers  a  share  in  the  benefits." 


RECOGNITION    OF    ORGANIZED    LABOR  189 

Trade  Unions       Speaking  for  another  branch  of  organized 
Recognized  in      labor,  M.  M.  Garland,  former  president  of 
Rolling  Mills        the  Amalgamated  Association  of  Iron  and 
Steel  Workers,  said : 

"Thus  far  in  this  new  day  of  trusts  the  workmen  in 
rolling  mills  find  their  inclination  is  to  treat  with 
organization.  The  annual  wage  scales  and  agreement 
were  presented  by  our  representatives  and  conferences 
arranged  promptly.  An  advance  in  wages,  ranging 
from  ten  to  twenty-five  per  cent,  in  different  depart- 
ments, was  secured,  and  further  advances  in  wages 
seems  assured  by  reason  of  advance  in  prices  of  mate- 
rial and  product,  which  is  one  of  our  agreements.  A 
number  of  plants  that  had  been  operating  non-union 
and  at  unfair  wages,  were  unionized  by  the  wage  rates 
applying  to  them  since  they  had  become  a  part  of  the 
trusts. 

"I  would  not  be  understood  to  infer  that  there  would 
not  have  been  an  advance  in  wages  if  the  trust  move- 
ment had  not  been  on,  nor  do  we  think  the  price  of 
material  would  have  been  less,  for  we  note  that  in 
branches  where  trusts  do  not  control  the  greater  rate 
of  advance  has  occurred  in  material.  That  in  this  coun- 
try a  trust,  or  the  trusts,  could  long  maintain  an 
unnatural  or  inordinate  price  for  material  or  product 
is  a  remote  contingency,  for  not  alone  would  other 
capital  interested  in  the  consumption  of  product  com- 
bine on  as  large  a  scale  and  become  their  competitor, 
but  the  fact  remains  that  there  is  not  an  article  pro- 
duced in  these  modern  times,  but  there  are,  or  can  be, 
adopted  several  substitutes  for  it,  and  the  cost,  as  a 
rule,  will  not  vary  enough  to  permit  any  very  great  or 
long-lasting  extremity  to  our  needs." 


140  THE    OTHER    SIDE 

•p    i  CL  John  M.  Stahl,  secretary    of  the  Farmers' 

Trusts  Should  be  J 

Utilized  National  Congress,  while  sharply  criticising 

Not  Destroyed  trusts  in  many  respects,  could  not  refrain 
from  expressing  his  approval  of  the  principle  upon 
which  they  are  founded,  Among  other  things,  he 
said: 

"I  believe  that  it  will  be  wiser  for  us,  not  to  seek  to 
destroy  it,  but  to  make  it  our  servant.  We  have  the 
machine;  it  is  for  us  not  to  try  to  smash  it,  but  to  dis- 
cover how  best  to  use  it.  I  believe  that  anything  that 
increases  the  productivity  of  mankind  is  a  good  thing 
and  should  work  good;  that  if  it  does  not  work  good, 
it  is  not  the  fault  of  that  thing  per  se;  that  whatever  in- 
creases the  productivity  of  human  labor  gives  man 
more  to  enjoy  and  more  time  for  recreation ;  that  it  is 
a  good,  though  to  reach  the  ultimate  benefit  of  the 
many  it  may  for  a  time  hurt  the  few,  as  when  a  new 
labor-saving  machine  for  a  time  throws  men  out  of 
employment,  and  therefore  the  trust  ought  to  be  a 
good  thing.  If  so  far  it  has  wrought  ten  times  as  much 
harm  as  good  to  the  people,  as  it  seems  to  have  done, 
that  is  not  the  fault  of  the  trust,  which  certainly  can 
exist  without  being  a  monopoly,  but  because  it  has 
been  misused." 

Samuel  M.  Jones,  Mayor  of  Toledo,  Ohio, 

has  long  been  regarded  as  an  advanced 
thinker  upon  the  labor  and  social  questions 
of  the  day.  Himself  an  employer  and  a  large  capitalist, 
his  relations  with  the  laboring  class  have  become  of  the 
most  cordial  character.  His  views  concerning  the 
municipal  control  of  city  monopolies  are  well  known 
and  his  utterances  on  many  occasions  have  been  of  a 
radical  character.  Naturally  he  might  be  looked  for 


RECOGNITION    OF    ORGANIZED    LABOR  141 

on  the  anti-trust  platform.  On  the  contrary,  he  also 
frankly  recognizes  that  trusts  are  an  inevitable  out- 
growth of  modern  business  conditions,  that  they  have 
come  to  stay  and  that  they  will  be  factors  for  ultimate 
good  to  the  whole  people.  In  his  address  at  the  Chi- 
cago Conference  he  took  this  reasonably  conservative 
view  of  the  subject: 

"The  triumph  of  the  trust  is  one  of  the  marvels  of 
the  closing  years  of  the  nineteenth  century;  but  they 
are  an  economic  development,  strictly  in  the  line  of 
progress,  and  our  problem  is  not  how  to  destroy  them, 
but  how  to  use  them  for  the  good  of  all.  Like  their 
prototype,  the  labor-saving  machinery  constructed  of 
wood  and  iron,  they  have  come  to  stay.  A  labor-sav- 
ing machine  might  have  great  value  on  account  of  its 
producing  capacity,  but  might  be  so  destructive  of 
human  life  as  to  make  it  imperative  that  it  should  be 
so  improved  that  its  'saving'  power  might  be  utilized 
without  injury  to  the  operative. 

"Thirty-five  years  ago  I  saw  a  mob  of 
teamsters  trymg  to  destroy  the  first  pipe 
line  ever  built  for  the  transportation  of  oil. 
They  feared  that  the  pipe  line  was  an  'attack  upon  their 
craft.'  The  movement  against  the  trusts  rests  identi- 
cally on  the  same  moral  basis  as  the  rage  of  a  mob 
against  the  pipe  line,  elevators  and  labor-saving 
machinery  generally,  and  I  predict  that  it  will  have  the 
same  result  in  the  end.  All  the  legislation  thus  far 
against  the  trust  has  been  almost  as  futile  as  a  law 
against  the  change  in  the  moon's  phases  or  the  ebb 
and  flow  of  the  tides.  We  are  not  going  back  to  the 
individualistic  method  of  production.  We  are  not  go- 
ing to  pull  down  the  department  stores  in  order  that 


14S  THE    OTHER    SIDE 

the  people  shall  sustain  fifty  small  stores  in  place  of 
the  one  department  store.    If  that  is  what  we  propose, 
let  us  continue  the  principle;  destroy  the  small  stores 
and  turn  the  business  over  to  peddlers.    This  will  be 
carrying  to  logical  conclusion  the  senseless  objection 
to  the  department  store  and  the  trusts. 
The  Trust  a        "The  trust  is  preparing  the  way,  showing 
Labor-Saving        society   the   great   benefits    that    may    be 
Machine  derived  through  association  in  industry  and 

the  great  economic  value  of  association,  both  in  pro- 
duction and  distribution.  An  invention  that  lightens 
the  burden  of  the  world's  toilers  and  makes  it  possible 
for  one  man  to  do  the  work  of  twelve  is  called  a  'labor- 
saving  machine.'  Does  it  matter  whether  the  machine 
is  made  of  wood  and  iron  or  composed  of  organizations 
and  associations  of  men  ?  If  the  result  is  the  same  it  is 
a  labor-saving  machine.  In  this  sense  the  trust  is  a 
labor-saving  machine." 


SUPERVISION  AND  REGULATION 

VARIOUS  IDEAS  THAT  HAVE  BEEN  SUGGESTED  FOR  DI- 
RECTING CONCENTRATED  CAPITAL  SO  AS  TO  SECURE 
PRODUCTIVE  EFFICIENCY  AND  TO  CONSERVE  THE  INTER- 
ESTS OF  INVESTORS-IMPORTANCE  OF  PUBLICITY 

Necessity  of  Regarding  the  necessity  of  some  sort  of 
Supervision  and  supervision  and  regulation  of  amalgamated 
Regulation  capital,  it  may  be  frankly  admitted  at  the 
outset  that  the  question  has  already  gone  beyond  the 
debatable  stage.  Those  who  have  the  largest  interests 
at  stake  in  these  corporations  and  are  looking  forward 
to  the  future  with  the  clearest  business  insight,  recog- 
nize more  completely  the  truth  of  this  proposition  than 
any  one  else  possibly  can.  They  know  that  the  great 
industrial  force  of  concentrated  wealth,  already  strong 
and  likely  to  grow  in  extended  scope  and  power  in  the 
near  future  far  beyond  even  its  present  capacities,  must 
be  held  fully  under  control. 

Naturally,  those  who  are  opposed  to  the  contem- 
poraneous movement  of  capital  massing  itself  in  solid 
phalanxes  are  particularly  insistent  upon  this  point. 
There  is  really  no  substantial  disagreement  between 
the  most  earnest  friends  and  the  most  pronounced 
opponents  of  capital  upon  the  broad,  general  propo- 
sition of  supervision  and  regulation.  The  latter  argu- 
ing for  what  they  honestly  consider  the  interests  of  the 

143 


144  THE    OTHER    SIDE 

public  and  the  former  intent  upon  the  protection  of 
capital  and  its  just  treatment  and  wise  direction,  as 
well  as  upon  the  best  interests  of  labor  and  the  public, 
meet,  at  this  point,  on  a  common  platform.     Differ- 
ences that  exist  between  the  two  are,  for  the  most  part, 
merely  differences  of  method  and  of  detail. 
T     F  Id  F        Corporations  have  always  been  creatures  of 
tions  of  the  State.  Originally,  under  the  old  English 

Corporations        jaWj  ^y  were  devised  simply  and  solely  for 

the  public  good.  In  later  generations  the  purpose  of 
personal  advantage  to  those  who  invest  in  them,  has 
been  added  to  that  of  public  good;  thus  they  have 
taken  on  a  two-fold  character. 

Sometimes,  it  may  be  admitted,  the  side  of  personal 
advantage  in  the  operations  of  a  corporation  may  seem 
to  overweight  those  of  public  good,  or,  at  least,  to 
manifest  that  disposition.  Nevertheless,  a  careful 
study  of  the  subject  will  show  that,  despite  all  other 
considerations,  service  to  the  public,  in  some  degree, 
at  least,  can  never  be  separated  from  the  life  of  a  cor- 
poration, nor  even  safely  ignored  by  its  managers.  As 
has  been  frequently  expressed  on  the  pages  of  this 
volume,  that  is  really  the  price  that  it  pays  for  its  suc- 
cessful and  prolonged  existence. 

Conceded  Right  °Ut  °f  the  ori£inal  Public  nature  of  cor' 
of  Government  porations  came  the  principle  of  governmen- 
Supervision  taj  rjgjlt  to  SUpervise  an(j  regulate  them. 

That  principle  has  been  firmly  established  through 
generations  of  observance  and  application.  The  years 
that  have  brought  about  vital  changes  in  the  general 
character  of  corporations,  their  field  of  operations  and 
their  influence  upon  human  affairs,  social,  political  and 
industrial,  have  only  served  to  strengthen  this  as  some- 


SUPERVISION    AND    REGULATION  145 

thing,  not  only  infinitely  profitable  to  the  community, 
but  also  imperatively  necessary  to  the  stability  of  cor- 
porate existence. 

Government  supervision  of  railroads,  for  example, 
has  operated  distinctly  to  the  advantage  of  the  capital 
invested  therein.  At  times,  of  course,  hardships  may 
have  resulted  therefrom,  for  popular  sentiment, 
which  largely  controls  in  such  matters,  is  not  always 
wise,  thoughtful  and  considerate.  On  the  other 
hand,  however,  advantages  have  accrued  in  a  multi- 
tude of  ways  through  this  agency.  It  has  often  pro- 
tected capital  from  unreasonable  attacks.  It  has  done 
much  to  encourage  business  development  by  assisting 
in  opening  new  avenues  for  profitable  enterprise.  Fre- 
quently it  has  curbed  ill-advised  competition.  Its  gen- 
eral tendency  has  been  altogether  toward  a  healthful 
condition  of  affairs  for  invested  capital. 
Supervision  and  What  is  true  of  railroads  has  also  been  true 
Its  Resultant  of  insurance  companies  and  of  municipal 
Public  Good  corporations  engaged  in  public  utilities. 
Invested  capital  in  all  those  lines  of  business  has 
been  protected  in  its  operations  and  encouraged 
and  upheld,  to  its  advantage,  while  at  the  same 
time,  the  public  interests  have  been  abundantly 
cared  for.  Without  going  further  into  details,  that  has 
been  in  general  the  result  of  government  supervision, 
State  and  federal,  of  those  corporations  that  have  cer- 
tain public  or  semi-public  duties  to  perform.  No  one 
now  presumes  to  dispute  the  right  of  this  exercise  of 
authority,  or  even  its  wisdom.  It  is  acknowledged  to 
be  one  of  the  important  functions  of  government  and 
to  be  altogether  for  the  common  good.  In  fact,  in  no 
small  degree,  the  stability  and  welfare  of  all  business 


146  THE    OTHER    SIDE 

is  dependent  upon  this  paternalism  to  which  it  is  sub- 
ject. 

-.    n .  It  cannot  be  too  often  or  too  emphatically 

The  Principle  r.  * 

Applied  to  Other  insisted  upon  that  in  principle  and  in  opera- 
Corporations  j.jon  contemporaneous  aggregations  of  capi- 
tal do  not  materially  differ  from  other  large  capitalistic 
organizations  that  have  preceded  them.  They  have  in 
them  the  same  reason  for  existence  and  the  same  pos- 
sibilities for  good.  They  are  subjected  to  the  same 
dangers  and  may  develop  a  like  possibility  for  abuse. 

Respecting  their  fields  of  operation  and  their  busi- 
ness methods  they  differ  largely,  as  has  been  frequently 
shown  in  this  volume,  from  the  corporations  that  are 
natural  monopolies.  In  many  particulars,  however, 
they  are  not  dissimilar.  They  are  subject  to  the  same 
economic  laws,  and  are  equally  as  sensitive  to  public 
opinion.  Being  closer  to  the  public,  and  in  nowise 
under  government  protection,  sometimes  they  are,  if 
anything,  in  an  even  more  precarious  position  than  are 
the  corporations  of  the  other  class.  If  supervision  and 
regulation,  to  the  end  of  harmonizing  differences, 
smoothing  the  way  for  rational  business  development 
and  improving  the  tone  of  public  opinion,  have  been 
found  efficacious,  through  generations  of  experience, 
in  the  case  of  corporations  generally,  the  same  meas- 
ures may  reasonably  be  expected  to  show  quite  as 
satisfactory  results  in  their  application  to  the  new 
forms  of  business  enterprise. 

D.     ..  This  is  not  a  question  of  remedies.    Using 

Not  Remedy,  is    the  term  remedy  presupposes  evils  that  need 

to  be  remedied,  and  thus  far  that  is  a  pure 

assumption.    Evils  may  develop  from  the  operations 

of  trusts.    Such  possibilities  always  exist  in  power  that 


SUPERVISION    AND    REGULATION  147 

is  massed,  whether  it  be  of  capital,  of  labor,  or  of  indi- 
viduals associated  together  for  any  one  of  a  hundred 
different  purposes.  So  far  as  trusts  are  now  con- 
cerned, the  evils  are,  however,  more  imaginary  than 
real. 

No  one  can  yet  be  certain  whether  evils  will  arise,  or 
what  may  be  reasonably  predicated  of  their  nature 
when  they  may  come.  The  trust  itself  is  not  under- 
stood. Almost  as  many  different  opinions  prevail  con- 
cerning it  as  there  are  individuals  who  have  seriously 
studied  it.  Its  nature,  its  capacities,  its  influence  and 
the  results  that  may  be  expected  from  it  have  not  yet 
been  removed  from  the  arena  of  academic  speculation. 

We  are  largely  in  the  dark  concerning  the  results 
that  may  or  may  not  be  attained  from  the  practical 
working  of  this  new  business  machinery.  Until  we  can 
find  ourselves  assuredly  on  solid  ground,  it  is  idle  to 
talk  about  rinding  remedies.  What  we  really  mean  is 
the  establishing  of  certain  principles  and  certain  meth- 
ods of  procedure,  not  to  remedy  fancied  evils,  but 
solely  to  give  intelligent  and  wholesome  direction  to 
industrial  forces  that  have  in  them  ample  powers  to 
accomplish  good  for  the  human  race. 

„     ,  ,.     u        It  is  not  to  the  interests  of  the  public,  it  is 
Regulation  More 

than  Ever  not  to  the  interests  of  wage-earners,  it  is  not 

Demanded  to  ^e  interests  of  the  share-owners,  it  is  not 

to  the  interests  of  the  managers  of  these  large  corpora- 
tions that  their  business  operations  should  proceed  in 
any  haphazard,  uncertain  manner.  Modern  aggrega- 
tions of  capital  have  had  their  birth  in  the  imperative 
business  demand  for  centralization  and  more  compact- 
ness, to  the  end  that  greater  efficiency  may  be  secured. 
Loose,  uncertain  methods  of  carrying  on  large 


148  THE    OTHER    SIDE 

manufacturing  enterprises  and  in  handling  large  busi- 
ness concerns  had  most  to  do  with  the  development  of 
the  trust  idea.  Competition  brought  about  a  sort  of 
guerilla  practice;  we  need  not  say  guerilla  warfare, 
although  at  times  it  nearly  approached  that.  Out  of 
that  chaos  arose  the  stronger  force  of  consolidated 
capital,  as  it  marshalled  itself  at  the  end  of  the  cen- 
tury. 

Every  one  now  recognizes  that  capital,  thus  freed 
from  a  condition  that  was  proving  destructive  to  itself 
and  to  the  best  interests  of  the  public,  must,  of  neces- 
sity, proceed  straight  along  the  road  upon  which  it  has 
started.  More  than  ever  before  orderly  arrangement, 
systematic  business  methods  and  perfect  adjustment  to 
the  new  business  conditions  must  be  part  and  parcel  of 
all  enterprise.  The  agencies  that  underlie  this  move- 
ment will  naturally  force  the  large  aggregations  of 
capital  that  have  resulted  therefrom  into  further 
rational  measures  for  its  own  protection  and  for  the 
development  of  its  usefulness  along  the  line  of  im- 
proved service  to  the  public.  This  is  an  inevitable  and 
logical  outcome  of  the  trust  idea. 

Suggestions  from  Suggestions  by  the  score  and  by  the  hun- 
Friends  and  dred  have  been  made  regarding  the  best 
Opponents  methods  of  meeting  this  new  issue.  Natur- 
ally many  of  them  have  been  of  an  exceedingly  radical 
character.  Most  people  are  moved  by  the  disposition 
to  hit  a  head  wherever  they  see  it.  It  oftentimes  ap- 
pears so  much  easier  to  pound  vigorously  at  what  is 
assumed  to  be  an  evil,  rather  than  to  examine  the  sub- 
ject carefully  and  to  devise  rational  treatment  for  it. 
Radical  reformers  confine  themselves  almost  entirely 
to  demanding  that  existing  trusts  shall  be  disin- 


SUPERVISION    AND    REGULATION  149 

tegrated  and  the  formation  of  future  ones  prevented, 
on  the  ground  that  the  movement  is  an  artificial  and 
violent  subversion  of  the  system  of  competition  that 
has  proved  so  useful  in  the  past.  More  friendly  inves- 
tigators come  forward  with  plans  for  regulation  and 
supervision  in  various  forms,  as  railroads,  insurance 
companies,  factories,  and  so  on,  are  now  in  a  measure 
supervised  by  State  and  nation. 

It  would  be  impossible  within  reasonable 
sPace  to  review  all  the  suggestions  that 
have  been  made  for  treating  trusts,  and 
such  a  course  is  really  unnecessary  for  a  proper  under- 
standing of  this  phase  of  the  subject.  Varying  in  in- 
finite minor  details,  the  vast  array  of  propositions  can 
be  digested  and  finally  presented  in  reasonably  com- 
pact form  that  shall  give  a  clear  idea  of  general  public 
sentiment  on  this  point.  One  recommendation  is  that 
the  government  should,  by  a  special  tax,  appropriate 
all  the  net  earnings  of  trust  corporations  above  six  or 
seven  per  cent.,  thus  removing  the  incentive  for  raising 
prices  or  securing  to  the  public  at  large  all  profits  in 
excess  of  a  fair  return  upon  invested  capital.  Another 
proposition  is  to  limit  the  capital  and  purposes  of  cor- 
porations and  make  each  shareholder  personally  liable 
as  a  partner.  Professor  Bemis  and  others  suggest  that 
the  tariff  on  goods  made  by  the  trusts  should  be  low- 
ered or  removed.  Professor  Richard  T.  Ely  would 
prohibit  discrimination  in  railroad  rates. 
c  . .  ..  Judge  Thompson  of  St.  Louis,  as  quoted 

Against  Combina-  in   The    Corporation    Problem   by    F.   W. 
tion  Cook,  propounds  the  proposition  that  the 

trusts,  if  it  should  be  found  necessary  to  combat  them 
at  all,  should  be  fought  with  their  own  weapons.  His 


150  THE    OTHER    SIDE 

idea  is  an  amplification  and  strengthening  of  competi- 
tion.   He  says: 

"If  the  operation  of  natural  laws  does  not  check  the 
trust  movement,  the  remedy  is  first  to  be  sought  out- 
side of  law,  outside  of  government,  by  individual 
action,  by  counter  movements  of  some  kind.  If  capital 
combines  against  labor,  labor  must  combine  against 
capital.  If  manufactures  combine  against  agriculture, 
agriculture  must  combine  against  manufactures.  If 
the  common  carrier  combines  against  the  farmer,  the 
manufacturer,  the  merchant  and  the  laborer,  then  all 
must  combine  against  the  common  carrier.  Meet  com- 
bination with  combination,  strike  with  strike,  lockout 
with  lockout,  fight  the  devil  with  fire.  Withdraw  all 
governmental  aid,  in  the  form  of  protective  tariffs  or 
otherwise,  from  combinations  which  threaten  to  sup- 
press competition  in  any  trade.  *  *  *  Withdraw 
corporate  franchises  from  every  corporation  which  at- 
tempts to  suppress  competition.  *  *  *  If  these 
means  fail,  level  against  the  individuals — not  against 
the  corporations — the  machinery  of  the  criminal  law." 
Over-Capitaliza-  Manv  individuals  believe  that  the  preven- 
tion Should  be  tion  of  over-capitalization  is  the  most  de- 
sirable thing  to  be  attained  in  this  connec- 
tion and  will  remove  all  possibility  of  the  trusts  being 
in  any  way  injurious  to  the  common  good.  The 
Massachusetts  rule  that  permits  no  corporation  to 
issue  stocks  or  bonds  in  excess  of  a  fair  and  officially 
approved  valuation  of  assets  is  brought  forward  by 
the  economists  of  this  school  to  show  the  good  work- 
ings of  such  a  law.  Such  eminent  public  men  as  ex- 
Governor  Roswell  P.  Flower,  Senator  Chauncey  M. 
Depew  and  others  have  strongly  advocated  legal  meas- 


SUPERVISION    AND    REGULATION  151 

ures  against  over-capitalization.  Several  college  pro- 
fessors, notably  Professor  David  Kinley  of  the  Univer- 
sity of  Illinois,  Professor  J.  W.  Jenks  and  others  have 
taken  the  same  ground. 

The  Suggestion    Senator  w-  E-  Chandler  of  New  Hampshire 
for  Federal  has  proposed  that  the  federal  government 

should  exercise  its  full  repressive  power 
through  interstate  commerce  regulation,  and  that,  sup- 
plementary to  this,  State  Legislatures  should  place 
various  limitations  on  corporations,  so  that  they  will 
not  be  able  to  acquire  monopolistic  power.  In  line 
with  this  suggestion  of  federal  control  have  been  vari- 
ous propositions  that  have  been  advanced  for  the  in- 
corporation of  companies  by  the  federal  government. 
John  D.  Archbold,  of  the  Standard  Oil  Company, 
thinks  that  with  a  system  of  federal  incorporation, 
"under  such  fair  restrictions  and  provisions  as  should 
rightly  attach  to  them,  any  branch  of  business  could 
be  fairly  entered  upon  by  all-comers  and  the  talk  of 
monopoly  would  be  done  away  with." 

William  J.  Bryan  has  also  placed  himself  in  favor  of 
federal  incorporation  and  control.  He  has  suggested 
that  no  corporation  without  a  federal  license  should 
do  business  outside  its  own  State,  and  even  then  in  no 
other  State,  without  the  license  of  that  State.  He 
would  refuse  federal  licenses  to  all  corporations  that 
have  not  first  proved  that  they  are  not  over-capitalized 
and  that  they  do  not  propose  to  seek  to  become  mon- 
opolies. Professor  John  Bates  Clark  of  Columbia  Uni- 
versity would  also  appeal  to  Congress  for  a  consti- 
tutional amendment  prohibiting  discrimination  in  sell- 
ing prices  by  corporations,  thus  putting  a  stop  to 
underselling.  The  same  authority  also  says: 


152  THE    OTHER    SIDE 

"Reforming  the  tariff,  reforming  the  patent  laws, 
controlling  the  common  carriers,  and,  above  all,  secur- 
ing uniform  treatment  of  all  customers  by  the  trusts 
themselves;  this  combination  of  measures  constitutes 
a  policy  in  regard  to  trusts  that,  however  difficult  it 
may  at  first  be,  is  possible,  because  it  is  in  harmony 
with  powerful  tendencies  that  are  already  working.  It 
appeals  to  a  latent  power  of  competition  that  even  now 
holds  trusts  greatly  in  check.  To  hold  them  more  in 
check,  and  to  do  it  in  a  natural  way,  is  to  solve  the 
problem  of  trusts." 

Foremost  among  the  suggestions  that  have 

bubMany  Favored  been  made  has  been  that  of  Publicity-  Many 

individuals  seem  to  have  hit  upon  this 
thought  almost  simultaneously,  and  it  has  already  had 
the  weight  of  considerable  authority  in  its  presentation 
to  the  public.  W.  Bourke  Cockran  would  compel 
every  corporation  to  make  a  full  report  every  year  of 
all  its  business,  property,  franchises,  good-will  and 
assets  to  the  federal  government,  so  that  the  public 
shall  have  full  information  for  its  protection  against 
any  possible  monopolistic  wrong. 

Under  his  plan  a  distinction  would  be  observed  be- 
tween corporations  which  enjoy  no  favor  from  the 
State  and  those  specially  chartered  to  perform  public 
functions.  The  former  would  be  permitted  to  retain 
their  natural  manufacturing  secrets,  while  the  latter 
would  be  allowed  to  maintain  no  secrecy  whatsoever. 
An  elaboration  of  this  idea  of  federal  publicity  is  the 
suggestion  that  every  corporation  engaged  in  inter- 
state or  quasi  public  business,  or  large  enough  to  con- 
trol an  industry,  should  be  annually  subjected  to  an 
auditing  of  its  affairs  by  a  commission. 


SUPERVISION    AND    REGULATION  168 

It  is  worthy  of  note  that  this  plan  of  publicity  has 
found  lodgement  and  favorable  consideration  in  the 
minds  of  many  of  those  who  are  personally  interested 
in  the  large  corporations.  Within  proper  restrictions, 
some  of  which  have  just  been  suggested,  it  would  per- 
form a  useful  service  in  insuring  greater  stability  to 
the  business  enterprises  conducted  by  these  corpora- 
tions and  in  increasing  the  public  confidence  in  them. 
Conclusions  of  This  idea  of  publicity  has  been  put  into 
definite  form  by  the  United  States  Indus- 
trial  Commission,  and  a  step  seems  thereby 
to  have  been  taken  toward  its  ultimate  acceptance  in 
some  form  or  other.  Throughout  the  year  1899  tne 
commission  devoted  its  time  almost  exclusively  to  the 
investigation  of  industrial  combinations.  Numerous 
witnesses  were  examined,  managers  of  the  combina- 
tions and  their  chief  competitors,  corporation  lawyers, 
representatives  of  labor  interests,  students  of  political 
economy  and  others.  Statistics  were  secured  both 
from  those  connected  with  combinations  and  from 
unprejudiced  outsiders,  and  the  trust  laws  and  judicial 
decisions  of  the  various  States  were  studied. 

In  February,  1900,  the  commission  presented  to 
Congress  a  preliminry  report  embodying  some  of  its 
conclusions  and  suggestions.  In  this  report  the  opinion 
was  expressed  that  "industrial  combinations  have  be- 
come fixtures  in  our  business  life;"  that  "their  power 
for  evil  should  be  destroyed  and  their  means  for  good 
preserved."  It  was  recommended  that  the  powers  of 
the  Interstate  Commerce  Commission  should  be  ex- 
tended in  order  to  prevent  the  evils  that  arise  from 
freight  discrimination,  and  publicity  was  especially 
proposed  as  best  calculated  to  counteract  any  ills  that 


154  THE    OTHER    SIDE 

may  arise  from  the  operations  of  the  combinations.  In 
detail,  the  recommendations  of  the  commission  as  to 
publicity  were  as  follows: 

P  br  *tv     d       "^°  Prevent  tne  organizers  of  corporations 

Methods  of  Secur-  or  industrial  combinations  from  deceiving 

'nS (t  investors  and  the    public,  either    through 

suppression  of  material  facts  or  by  making  misleading 

statements,  your  commission  recommend: 

"That  the  promoters  and  organizers  of  corporations 
or  industrial  combinations  which  look  to  the  public  to 
purchase  or  deal  in  their  stocks  and  securities  should 
be  required  to  furnish  full  details  regarding  the  organi- 
zation, the  property  or  services  for  which  stocks  or 
securities  are  to  be  issued,  amount  and  kind  of  same, 
and  all  other  material  information  necessary  for  safe 
and  intelligent  investment. 

"That  any  prospectus  or  announcement  of  any  kind 
soliciting  subscriptions  which  fails  to  make  full  dis- 
closures as  aforesaid,  or  which  is  false,  should  be 
deemed  fraudulent,  and  the  promoters,  with  their  asso- 
ciates, held  legally  responsible. 

"That  the  nature  of  the  business  of  the  corporation 
or  industrial  combination,  all  powers  granted  to  direct- 
ors and  officers  thereof,  and  all  limitations  upon  them 
or  upon  the  rights  or  powers  of  the  members,  should 
be  required  to  be  expressed  in  the  certificate  of  incor- 
poration, which  instrument  should  be  open  to  inspec- 
tion by  any  investor. 

"The  affairs  of  a  corporation  or  industrial  combina- 
tion should  be  carried  on,  without  detriment  to  the 
public,  in  the  interest  of  its  members  and  under  their 
lawful  control.  To  this  end  the  directors  or  trustees 
should  be  required  to  report  to  the  members  thereof 


SUPERVISION    AND    REGULATION  166 

its  financial  condition  in  reasonable  detail,  verified  by 
a  competent  auditor,  at  least  once  each  year;  to  inform 
members  regarding  the  method  and  conduct  of  busi- 
ness by  granting  them,  under  proper  restrictions,  ac- 
cess to  records  of  directors'  meetings,  or  otherwise;  to 
provide  for  the  use  of  members,  before  the  annual 
r.  eelings,  lists  of  members,  with  their  addresses  and 
their  several  holdings;  and  to  provide,  in  whatever 
other  ways  may  be  named  in  the  certificate  of  incor- 
poration, means  whereby  the  members  may  prevent 
the  misuse  of  their  property  by  directors  or  trustees. 

"The  larger  corporations — the  so-called  trusts — 
should  be  required  to  publish  annually  a  properly 
audited  report,  showing  in  reasonable  detail  their  as- 
sets and  liabilities,  with  profit  or  loss;  such  report  and 
audit  under  oath  to  be  subject  to  government  inspec- 
tion. The  purpose  of  such  publicity  is  to  encourage 
competition  when  profits  become  excessive,  thus  pro- 
tecting consumers  against  too  high  prices  and  to 
guard  the  interests  of  employees  by  a  knowledge  of  the 
financial  condition  of  the  business  in  which  they  are 
employed." 

In  the  New  York  Legislature  of  1900  an 

Proposed  Legisla.      t       u  d  Th     Business  Companies'  Act, 
tion  in  New  York 

was  introduced,  but  was  not  enacted.     It 

was  declared  by  its  advocates  to  be  the  most  complete 
attempt  which  has  been  made  to  define  what  is  meant 
by  publicity  in  laws  regulating  corporations. 

The  act  provided  that  every  prospectus  issued  with 
a  view  of  obtaining  subscriptions  for  shares  or  for 
bonds  in  a  company  organized  under  the  act,  should 
give  all  details  concerning  the  work  of  the  promoters 
or  directors  or  the  contracts  into  which  they  entered  in 


156  THE    OTHER    SIDE 

the  organization  of  the  company;  the  consideration 
paid  for  property  purchased  or  acquired;  the  com- 
missions or  awards  for  subscribing  for  stock  or  for 
procuring  subscriptions,  and  the  amount  of  money  to 
be  used  for  preliminary  expenses,  that  to  be  reserved 
for  working  capital,  that  to  be  paid  in  whatever  form 
to  the  promoter  himself  or  to  those  associated  with 
him. 

It  was  further  provided  that  the  promoter  should 
not  sell  any  property  of  his  own,  directly  or  indirectly, 
to  the  company  without  disclosing  all  facts  in  connec- 
tion with  the  transaction.  Severe  penalties  were 
affixed  for  any  suppression  or  misrepresentation  of 
material  facts. 

Provision  was  made  that  the  certificate  of 
mcorPoration  should  contain  a  description 
of  the  nature  of  the  business;  the  limitations 
upon  the  rights  of  shareholders;  a  statement  of  the 
rights  and  duties  of  the  directors,  and  all  other  material 
information.  Every  contract  affecting  a  stockholder's 
rights  or  the  value  of  the  shares  was  to  be  included 
in  the  certificate  of  incorporation,  and  these  contracts 
were  to  be  on  file  in  the  registered  office  for  a  stock- 
holder to  examine,  or  to  have  a  copy. 

Going  further,  the  act  provided  that  certificates  of 
stock  should  contain  on  their  face  a  notice  of  any 
liability  upon  the  stockholder's  rights,  and  that  the 
certificates  should  state  if  stock  had  been  issued  for 
property  or  services,  and  the  proportions  of  the  total 
stock  so  issued.  The  act  contemplated  that  lists  of 
shareholders,  with  their  holdings,  should  be  kept  at 
the  office  of  the  company,  free  to  the  inspection  of 
every  bona  fide  shareholder,  and  that  every  share- 


SUPERVISION    AND    REGULATION  157 

holder  should  have  access  to  the  records  of  the  direct- 
ors' meetings. 

As  a  further  curb  upon  the  directors,  it  was  pro- 
posed that  in  case  they  refused  to  call  annual  meetings 
of  stockholders,  their  salaries  should  stop  until  such 
a  meeting  had  been  held,  and  that  they  should  be  in- 
eligible for  re-election  if  they  failed  to  provide  for  the 
shareholders  all  proper  lists  of  holdings  or  other  in- 
formation to  which  the  latter  were  entitled. 

An  annual  shareholders'  balance  sheet  was 

Annual  State-  another  measure  incorporated  in  the  act.  in- 
mcnts  oi  business 

tended  to  give  a  complete  statement  of  the 

business  of  the  company,  verified  by  auditors  elected 
by  the  shareholders,  and,  in  the  case  of  the  larger  com- 
panies, duly  qualified  and  bonded.  This  balance  sheet 
was  not  made  to  include  legitimate  business  secrets 
of  the  company,  and  would  be  accessible  only  to 
shareholders.  The  duties  of  the  auditors  were  set 
forth  as  being  simply  to  investigate  and  declare  that 
this  balance  sheet  represented  accurately  the  condition 
of  the  business,  without  giving  details  contained  in  the 
private  balance  sheet,  open  only  to  the  directors  and 
officers  of  the  company  and  to  the  auditors.  In  actual 
operation  it  was  expected  that  small  private  corpora- 
tions, that  were  not  much  more  than  partnerships, 
would  keep  this  report  strictly  private,  while  the  infor- 
mation in  regard  to  larger  corporations  with  hundreds 
or  thousands  of  shareholders,  whose  stocks  are  dealt 
in  on  the  exchanges,  would  become  public  property 
immediately. 

Measures  to  ^  t^ie  terms  o*  t^ie  act  ^e  corporation  tax 
Encourage  Cor-  was  reduced  from  one-eighth  of  one  per 
porations  cent  to  one.fiftieth  of  one  per  cent.  The 


158  THE    OTHER    SIDE 

liability  of  stockholders  was  limited  to  the  face  value 
of  their  shares.  The  directors  were  given  absolute 
power  to  fix  values  for  property  or  for  services,  for 
which  shares  might  be  issued,  but  they  were  com- 
pelled to  give  full  publicity  of  their  judgment  and 
action  in  such  matters.  Directors  were  held  rigidly 
to  account  for  fraud  or  real  neglect  of  duty,  but  were 
not,  as  under  the  existing  laws  of  New  York,  made 
responsible  for  all  the  debts  of  a  corporation  that 
might  be  incurred  through  the  carelessness  of  subor- 
dinates. 

Corporations  organized  under  this  act  were  to  be 
privileged  to  engage  in  any  lawful  business  except 
that  which  naturally  comes  under  the  banking,  insur- 
ance, or  transportation  laws,  provided  they  did  not 
ignore  the  requirements  of  the  act  regarding  publicity. 
A  section  gave  permission  to  corporations  already  or- 
ganized, or  foreign  corporations,  to  take  advantage  of 
the  new  act  by  meeting  the  conditions  regarding  pub- 
licity, paying  the  fees  imposed,  and  filing  the  proper 
certificates.  The  proposed  act  was  made  optional,  and 
not  compulsory.  It  was  believed  that  its  advan- 
tages would  become  so  clearly  apparent  that  many 
new  corporations  would  promptly  avail  themselves  of 
it,  and  that  others  would,  in  the  course  of  time,  find 
themselves  obliged  to  fall  into  line. 

...       .        There  can  be  no  doubt  that  it  is  of  prime 
Advantages  to  be  . 

Derived  from       importance   to  the   investing  public   that 


Publicity  there  shou\d  t>e  the  fullest  publicity  in  re- 

gard to  the  financial  conditions  and  operations  of  cor- 
porations. Primarily,  this  will  be  a  wholesome  meas- 
ure of  protection  to  stockholders,  for  it  gives  them  the 
knowledge  to  which  they  are  justly  entitled  concerning 


SUPERVISION    AND    REGULATION  169 

their  investments.  Its  advantage  does  not  end  there, 
however,  for  in  the  end  it  would  operate  most  to  the 
benefit  of  the  corporations  themselves. 

In  no  other  way  can  the  public  interest  in  corpora- 
tions be  maintained  and  fresh  capital  secured,  as  may 
be  required  from  time  to  time.  It  is  an  indispensable 
requisite  to  the  success  of  any  corporation  in  achiev- 
ing good  standing  in  the  investing  community  that  all 
the  facts  essential  to  a  complete  knowledge  of  its  finan- 
cial conditions,  and  its  prospects  for  business,  should 
be  made  clear  without  equivocation  or  concealment  of 
any  kind  whatsoever.  Figures  and  facts  should  be  pre- 
sented so  that  the  investing  public,  whose  capital  is 
sought,  may  be  able  to  accurately  determine  the  sta- 
bility and  intrinsic  value  of  the  securities. 

Voluntary  ^  *s  ^mPortant  tnat  sucn  conclusions  shall 

Publicity  Most  be  based,  not  on  what  the  speculation  of  the 
stock  market  reflects,  but  upon  what  the 
annual  statement  of  actual  business  shows.  That  this 
publicity  is  fully  demanded  by  the  situation  seems  to 
be  already  recognized  by  those  who  are  most  inter- 
ested in  and  responsible  for  the  prosperity  of  corporate 
wealth.  Legislation  is  not  necessary  to  bring  it  about. 
It  is  more  likely  to  come  from  the  voluntary  action  of 
the  officers  and  directors  of  corporations. 

Already  most  of  these  concerns  invite  the  invest- 
ment of  new  capital  by  putting  their  shares  upon  the 
market.  Before  long  there  will  undoubtedly  come 
even  greater  demands  for  capital  than  has  yet  been 
manifested.  Then  the  corporations  that  can  make 
the  most  satisfactory  showing  for  safe  investment  to 
those  whose  financial  support  they  seek  will  be  most 
successful  in  securing  what  they  need  for  carrying  on 


160  THE    OTHER    SIDE 

their  operations.  Merely  for  the  conservation  and 
advancement  of  their  own  interests,  all  corporations 
must  finally  adopt  these  measures  of  publicity. 

Capital  Not  Per-  Although  most  of  the  suggestions  for 
manently  Threat-  regulations  and  supervision  carry  with  them 
encd  somewhat  of  a  feeling  of  hostility  to  aggre- 

gate capital,  there  is  little  or  no  call  for  apprehension 
on  that  account.  From  the  point  of  view  of  its  result, 
this  agitation  is  healthful.  It  makes  toward  judicious 
adjustment  of  puzzling  problems. 

The  real  danger  to  combined  capital  does  not  lie  in 
the  ultimate  result  of  the  opposition  to  it.  "The  mills 
of  the  gods  grind  slow,  but  they  grind  exceeding 
fine."  In  the  long  run,  economic  law  will  work  out 
its  logical  end.  Nothing  can  withstand  its  progress. 
The  Tightness  of  the  principle  involved  in  the  centrali- 
zation of  capital  is  no  more  questionable  than  the  ris- 
ing and  setting  of  the  sun,  and  it  will  prevail. 

But  however  confident  we  may  be  of  the  final  attain- 
ment of  this  result,  we  may  be  pardoned  if  we  have 
some  anxiety  about  the  immediate  present.  Little 
comfort  can  be  derived  from  the  thought  that  future 
generations  will  be  in  the  calm  enjoyment  of  condi- 
tions that  are  the  outgrowth  of  the  economic  problems 
of  to-day,  if,  meantime,  we,  of  the  present,  are  com- 
pelled to  endure  the  stress  of  opposition. 


ANTI-TRUST  LEGISLATION  FUTILE 

CURIOUS  EARLY  ENGLISH  STATUTES  AND  DECISIONS  AGAINST 
CORPORATIONS— RECENT  NATIONAL  AND  STATE  LAWS  AND 
THEIR  EFFECTS— DANGER  TO  CONCENTRATED  CAPITAL  EVEN 
IN  AGITATION  AND  DEAD  LETTER  LAWS 

Predominance  of  Out  of  the  complexities  of  civilization  has 
Statute  Law  in  grown  the  imposing  structure  of  modern 
Modern  Life  jurisprudence.  In  primitive  times  men  were 
able  to  manage  their  affairs  by  mutual  understanding 
or  by  the  exercise  of  individual  or  collective  powers 
of  might.  As  communities  expanded  and  cultivated 
variety  of  interests,  it  became  necessary  to  formulate 
into  legal  enactments  measures  for  general  conduct 
and  self-protection.  These  have  steadily  grown  in  ex- 
tent and  intricacy  until  now  they  constitute  the  founda- 
tion and  controlling  principle  of  all  society.  A  large 
part  of  the  time  the  wealth  and  the  talent  of  mankind 
is  devoted  to  the  discussion  and  creation  of  laws  by  na- 
tional, State  and  municipal  governing  bodies,  and  their 
interpretation  and  enforcement  by  those  employed  in 
the  administration  of  justice. 

Law  as  expressed  on  the  statute  books  has  become 
a  fetich.  Already  seriously-minded  men  are  beginning 
to  ask  if  we  are  too  much  governed,  and  among  the 
few  a  call  for  less  legislation  is  every  year  growing 
stronger  and  more  persistent.  As  yet,  however,  there 

161 


1«  THE    OTHER    SIDE 

are  only  slight  indications  of  any  widespread  dissatis- 
faction or  any  great  public  demand  for  turning  away 
from,  or  even  modifying,  the  practices  that  have  been 
the  ruling  conduct  of  mankind  for  thousands  of  years. 

_  ..       ,    Legislation  is  more  than  ever  regarded  as 

Exaggeration  of  .... 

the  Usefulness      the  panacea  for  all  the  ills,  political,  social  or 

of  Law  industrial,  that  mankind  is  heir  to.    When 

any  considerable  portion  of  the  public  feels  that  some- 
thing new  has  arisen  that  is  harmful,  or  threatens  to 
be  harmful,  to  its  interests,  legislation  is  promptly  and 
urgently  demanded. 

It  makes  no  difference  whether  the  apprehended 
evils  are  real  or  imaginary.  They  may  be  the  result  of 
disordered  reasoning;  they  may  arise  from  the  foolish 
fears  of  the  timid,  distrustful  of  the  motives  and  actions 
of  their  fellow-men;  they  may  be  the  product  of  a  pro- 
found ignorance  of  the  character  and  the  operations 
of  natural  laws.  The  outcome  is  the  same.  Forthwith 
there  are  fervent  appeals  to  Parliament,  to  Congress, 
to  Legislature,  that  something  shall  be  done,  and  done 
quickly,  to  ward  off  the  impending  disaster  that,  it  is 
declared,  threatens  the  very  foundations  of  society. 

Efforts  to  Co  t  I  ^n  no  Par^cu^ar  nas  this  unreasoning  de- 
Industry  by  mand  for  legislation  and  a  childlike  de- 
pendence upon  its  hoped-for  efficacy  been 
more  conspicuously  displayed  than  in  the  purely  busi- 
ness relations  of  men  to  each  other.  There  have  been 
times  in  the  history  of  the  world  when  the  let-alone 
principle  has  for  brief  periods  prevailed,  when  public 
sentiment  and  public  policy  encouraged  each  man  to 
work  out  his  own  industrial  salvation,  in  full  and  free 
competition,  unhampered  by  any  artificial  limitations. 
These  instances  have  been  exceptional,  however. 


ANTI-TRUST    LEGISLATION    FUTILE  168 

Most  frequently,  legal  procedure  has  been  promptly 
invoked  to  restrain  men  in  their  ordinary  occupations 
if  their  fellows  have  feared  that  the  rights,  privileges 
or  opportunities  of  others  were  threatened  or  appeared 
to  be  threatened.  History  is  full  of  examples  of  this 
antagonistic  attitude  of  the  masses  toward  individuals 
or  groups  of  individuals  who  have  attempted  to  lead 
the  way  in  industrial  advancement. 

Society  is  conservative.     It  clings  to  old 

wa^s  lon£  after  these  have  lost  usefulness. 

It  dislikes  to  move  out  of  ruts  and  looks 
askance  at  anything  new  until  the  new  has  fully  dem- 
onstrated its  practicability  and  its  beneficence.  Statutes 
have  been  demanded  and  enacted  against  every  great 
industrial  change  that  has  marked  the  progress  of  the 
world.  Statutes  have  again  and  again  attempted  to 
interfere  with  the  operations  of  economic  laws  govern- 
ing industry;  their  success  has  been  no  greater  than 
that  which  crowned  the  efforts  of  the  misguided  buf- 
falo who  attempted  to  stay  the  course  of  the  railroad 
train  rushing  across  the  Western  plains. 
i  The  statute  books  of  England  and  the  United  States 
have  bristled  with  enactments  in  restraint  of  trade. 
Those  of  a  hundred  years  ago  are  amusing  in  the  light 
of  events  since  their  day.  Writing  of  the  opposition 
that  was  once  made  to  the  introduction  of  stage- 
coaches in  England,  Macaulay  said:  "We  smile  at 
these  things.  It  is  not  impossible  that  our  descendants 
when  they  read  the  opposition  offered  by  cupidity  and 
prejudice  to  the  improvements  of  the  nineteenth  cen- 
tury may  smile  in  their  turn."  Some  of  us  are  already 
smiling.  We  are  not  leaving  that  delectable  enjoy- 
ment altogether  to  our  descendants. 


164  THE    OTHER    SIDE 

.   _    .. .       Before  the  middle  of  the  sixteenth  century 

Early  English  * 

Legislation  legislation  in  restraint  of  trade  began    to 

Against  Trade  rnake  its  appearance  upon  the  statute  books 
of  England.  Industry  had  scarcely  arisen  in  Great 
Britain  before  those  who  were  not  industrious  started 
to  inveigh  against  it  and  to  invoke  the  protection  of 
consolidated  authority.  A  statute  of  the  reign  of  Ed- 
ward VI.  numerates  "regrating,  forestalling  and  in- 
grossing"  as  venial  offenses. 

A  forestaller,  in  the  parlance  of  the  time,  was  a  per- 
son who  bought  goods  when  they  were  on  the  way  to 
market,  thus  forestalling  the  less  enterprising  would-be 
purchasers  who  waited  at  the  market  for  the  goods 
to  be  brought  there.  A  regrater  was  a  man  who 
bought  in  market  certain  food  products  and  victuals 
that  had  been  brought  there  to  be  sold,  and  sold  the 
same  again  at  an  increased  price  in  the  same  market 
or  any  other  market  within  four  miles  therefrom. 

An  ingrosser  was  one  who  obtained,  "by  buying, 

contracting    or    promise-taking,    any    grain,    butter, 

cheese,  fish,  or  other  dead  victuals  whatsoever,"  with 

intent  to  sell  again.    In  other  words,  the  statutes  were 

aimed  against  any  individual  who  essayed  to  trade  in 

food  supplies  which  he  had  not  himself  produced. 

Statutes  Against  An  enactment  of  1552  against  offenses  of 

Regrating,  Fore-  this  character  read:     "Albeit  divers  good 

stalling  or  ° 

Ingrossing  statutes  heretofore  have  been  made  against 

forestallers  of  merchandises  and  victuals,  yet  for  that 
good  laws  and  statutes  against  regraters  and  ingros- 
sers  of  the  same  things  have  not  been  heretofore  suffi- 
ciently made  and  provided,  and  also  for  that  it  hath 
not  been  perfectly  known  what  person  should  be  taken 
for  a  forestaller,  regrater  or  ingrosser,  the  said  statutes 


ANTI-TRUST    LEGISLATION    FUTILE  165 

have  not  taken  good  effect,  according  to  the  minds  of 
the  makers  thereof,  etc." 

Severe  penalties  were  affixed  for  offenses  under  this 
statute.  He  who  was  convicted  for  a  third  time  was 
condemned  to  sit  on  the  pillory,  to  forfeit  all  his  goods 
and  to  remain  in  prison  during  the  King's  pleasure. 
Many  other  statutes  were  also  enacted  in  the  restraint 
of  trade  at  the  same  period.  One  example  will  suffice 
to  show  the  frivolousness  of  this  legislation  as  it  ap- 
pears to  us  at  this  day.  This  was  "an  act  for  stuffing 
of  feather-beds,  bolsters,  mattresses  and  cushions."  It 
began  in  this  way:  "For  the  avoiding  of  the  great 
deceit  used  and  practiced  in  stuffing  of  feather-beds, 
bolsters,  pillows,  mattresses,  cushions  and  quilts." 
...  r\  •  •  Many  persons  were  made  amenable  to  these 
from  the  statutes  against  forestalling,  regrating  and 

English  Bench  ingrossing  and  prosecutions  were  numer- 
ous. Judgment  was  uniformly  pronounced  against 
them,  and  the  decisions  of  such  judges  as  Lord  Eldon 
and  Lord  Kenyon  scored  the  offenders  as  though  they 
were  guilty  of  the  most  heinous  offenses.  The  laws 
remained  upon  the  statute  books  of  England  until  the 
time  of  George  III.,  when  they  were  repealed. 

Even  later  than  that  date,  however,  in  1800,  a  man 
by  the  name  of  Rusby,  who  bought  250  bushels  of  oats, 
which  he  sold  at  a  profit  of  six  cents  a  bushel,  was 
arraigned  for  the  offense  of  regrating.  He  was  tried 
before  Lord  Kenyon,  who  decided  that,  although  the 
specific  laws  had  already  been  repealed,  his  acts  were 
common-law  offenses.  Part  of  Lord  Kenyon's  charge 
to  the  jury  was  as  follows: 

"Even  amongst  the  laws  of  the  Saxons  are  to  be 
found  many  wise  provisions  against  forestalling  and 


166  THE    OTHER    SIDE 

offenses  of  this  kind,  and  those  laws  laid  the  founda- 
tion of  our  common  law.  That  it  remains  an  offense 
nobody  has  controverted.  *  *  *  Speculation  has 
said  that  the  fear  of  such  an  offense  is  ridiculous,  and 
a  very  learned  man,  a  good  writer,  has  said  you  might 
as  well  fear  witchcraft.  I  wish  Dr.  Adam  Smith  had 
lived  to  hear  the  evidence  of  to-day,  and  then  he  would 
have  seen  whether  such  an  offense  exists,  and  whether 
it  is  to  be  dreaded.  If  he  had  been  told  that  cattle  and 
corn  were  brought  to  market,  and  then  bought  by  a 
man  whose  purse  happened  to  be  longer  than  his 
neighbor's,  so  that  the  poor  man  who  walks  the  streets 
and  earns  his  daily  bread  by  his  daily  labor  could  get 
none  but  through  his  handstand  at  the  price  he  chose  to 
demand;  that  it  had  been  raised  three  pence,  six  pence, 
nine  pence  and  more  per  quarter,  on  the  same  day, 
would  he  have  said  there  was  no  danger  from  such  an 
offense?" 

Under  this  decision  of  Lord  Kenyon  convictions 
long  continued  to  be  secured  in  the  courts.  Men  who 
bought  grain  to  sell  again,  as  jobbers,  brokers  or 
wholesalers  now  do,  were  prosecuted  and  often  con- 
victed and  punished.  It  was  not  until  the  reign  of 
Victoria  that  an  end  was  put  to  these  legal  practices 
by  a  sweeping  repeal  of  the  statutes. 

Statement  of  an  SPeaking  of  these  earl7  English    statutes 
Impartial  and  of  the  attitude  of  the  people  of  Europe 

Historian  toward  the  expansion  of  industry  and  com- 

merce, the  historian,  Buckle,  has  said: 

"Every  European  Government  which  has  legislated 
respecting  trade  has  acted  as  if  its  main  object  were 
to  suppress  the  trade  and  ruin  the  traders.  Instead 
of  leaving  the  national  industry  to  take  its  own  course, 


ANTI-TRUST    LEGISLATION    FUTILE  167 

it  has  been  troubled  by  an  interminable  series  of  regu- 
lations, all  intended  for  its  good,  and  all  inflicting  seri- 
ous harm.  To  such  a  height  has  this  been  carried  that 
the  commercial  reforms  which  have  distinguished 
England  during  the  last  twenty  years  have  solely  con- 
sisted in  undoing  this  mischievous  and  intrusive  legis- 
lation. 

"It  is  no  exaggeration  to  say  that  the  history  of  the 
commercial  legislation  of  Europe  presents  every  pos- 
sible contrivance  for  hampering  the  energies  of  com- 
merce. In  every  quarter  and  at  every  moment  the 
hand  of  government  was  felt — bounties  to  raise  up  a 
losing  trade  and  taxes  to  pull  down  a  remunerative 
one ;  this  branch  of  industry  forbidden  and  that  branch 
of  industry  encouraged;  laws  to  regulate  wages,  laws 
to  regulate  prices,  laws  to  regulate  profits,  interference 
with  markets,  interference  with  manufactories,  inter- 
ference with  machinery,  interference  even  with  shops." 
As  late  as  the  time  of  George  I. — early 
£«!fc*  SteL  in  the  eighteenth  century-the  following 
law  against  corporations  was  placed  upon 
the  statute  books  of  England : 

"Whereas,  it  is  notorious  that  several  undertakings 
or  projects  of  different  kinds  have,  at  some  time  or 
times  been  publicly  contrived  and  practiced,  or  at- 
tempted to  be  practiced,  which  manifestly  tend  to  the 
common  grievance,  prejudice  and  inconvenience  of 
great  numbers  of  your  Majesty's  subjects  in  their  trade 
and  commerce,  and  their  other  affairs ;  and  the  persons 
who  contrive  or  attempt  such  dangerous  and  mis- 
chievous undertakings  or  projects,  under  false  pretences 
of  public  good,  do  presume,  according  to  their  own 
devices  and  schemes,  to  open  books  for  public  sub- 


168  THE    OTHER    SIDE 

scriptions,  and  draw  in  many  unwary  persons  to  sub- 
scribe therein  toward  raising  great  sums  of  money 
whereupon  the  subscribers  or  claimants  under  them  do 
pay  small  proportions  thereof,  and  such  proportions 
in  the  whole  do  amount  to  very  large  sums,  *  *  * 
"And  whereas  in  many  cases  the  said  undertakers 
or  subscribers  have  *  *  *  presumed  to  act  as  if 
they  were  corporate  bodies,  and  have  pretended  to 
make  their  shares  of  stock  transferable  or  assignable, 
without  any  legal  authority,  either  by  act  of  Parlia- 
ment, or  by  any  chapter  from  the  crown  for  so  doing; 
*  *  *  and  many  other  unwarrantable  practices  (too 
many  to  enumerate)  have  been  and  daily  are  and  may 
hereafter  be  contrived,  set  on  foot,  or  proceeded  upon, 
to  the  ruin  and  destruction  of  many  of  your  Majesty's 
good  subjects,  if  a  timely  remedy  be  not  provided;  and 
whereas  it  is  become  absolutely  necessary  that  all  pub- 
lic undertakings  and  attempts,  tending  to  the  common 
grievance,  prejudice  and  inconvenience  of  your 
Majesty's  subjects  in  general,  or  great  numbers  of 
them,  in  their  trade,  commerce  or  other  lawful  affairs, 
being  effectually  suppressed  and  restrained  for  the 
future,  by  suitable  and  adequate  punishments  for  that 
purpose  to  be  ascertained  and  established." 
Similarity  of  ^  some  modern  anti-trust  orator  should 
Ancient  and  declaim  the  foregoing  statute  from  the 
Modern  Ideas  platform  where  quotation  marks  are  un- 
discernable,  there  would  be  little  suspicion  that  he 
was  simply  echoing  a  declaration  of  the  Old  World 
nearly  two  hundred  years  ago.  So  closely  does  the 
modern  opposition  to  corporations  follow  the  senti- 
ments and  the  expressions  of  generations  long 
gone  by. 


ANTI-TRUST    LEGISLATION    FUTILE  169 

Throughout  the  eighteenth  century  oppo- 

sition  to  corP°rations  in  England  was  nota- 
bly conspicuous.  The  disposition  of  the 
people  was  entirely  against  them  and  the  English 
statute  books  and  the  decisions  of  the  courts  exhibited 
manifold  attempts  to  repress  them.  One  statute  de- 
clared that  where  there  was  no  act  of  incorporation, 
the  practice  of  making  subscriptions  for  commercial 
undertakings  with  the  certificates  of  subscribers  trans- 
ferable, was  a  common  nuisance. 

Under  this  law  an  indictment  was  found  against  a 
number  of  individuals  who  organized  a  club  to  raise 
money  by  paying  in  a  monthly  instalment  in  order  to 
build  houses  for  one  another.  The  learned  judge  in 
passing  upon  this  indictment  said  that  such  a  business 
proceeding  was  calculated  to  put  down  industrial  com- 
petition that  was  most  advantageous  to  the  public. 
Beginning  with  Lord  Eldon,  the  courts  of  England 
long  held  that  companies  with  large  capital  arising 
from  numerous  small  contributions,  were  injurious  to 
the  public  and  illegal.  For  a  considerable  period  even 
the  formation  of  partnership  associations  for  purposes 
of  trade  was  prohibited  under  severe  fines  and  penal- 
ties. 

In  the  United  States  we  have  patterned 
closely  after  England,  both  in  common  and 
in  statute  law  and  in  judicial  decisions.  In 
the  early  history  of  the  country  enactments  in  restraint 
of  ordinary  trade  were  sufficiently  numerous,  although 
the  tendency  on  this  side  of  the  Atlantic  was  not  as 
strong  in  that  direction  as  it  was  in  the  mother  coun- 
try. The  prevailing  disposition  was  more  toward  indi- 
vidual freedom  of  action  than  it  was  among  our  Eng- 
lish ancestors. 


170  THE    OTHER    SIDE 

At  the  same  time  there  gradually  came  about  a  dis- 
position to  hamper  the  individual  in  various  small 
ways,  lest  he  should  unduly  take  advantage  of  his 
fellow-men  in  business  operations.  This  inclination 
often  took  the  form  of  petty  restrictions  and  various 
regulations  touching  qualities  of  goods  and  trade  be- 
tween different  sections  of  the  country.  It  never 
amounted  to  a  great  deal,  and  it  is  not  too  much  to 
say  that,  broadly  speaking,  law  in  the  United  States 
never  seriously  exercised  itself  in  restraint  or  direction 
of  trade. 

Of  course,  in  a  certain  sense,  the  tariff  legislation 
that  has  been  a  feature  of  the  industrial  progress  of  the 
country  for  nearly  a  century,  may  be  justly  regarded  as 
legislation  touching  trade,  but  its  avowed  purpose  to 
build  up  the  industries  of  the  country  places  it  in  a 
class  entirely  different  from  legal  enactments  designed 
to  restrain  or  regulate  domestic  industry  and  enter- 
prise. We  may  safely  leave  out  of  consideration  the 
subject  of  tariff  legislation  as  something  foreign  to  the 
scope  of  the  present  argument. 

It  was  not  until  the  last  decade  of  the  nine- 
teenth  centul7>  when  the  trust  problem  had 
assumed  large  proportions,  that  there  was 
any  serious  attempt  in  the  United  States  at  legislation 
that  could  be  fairly  called  in  restraint  of  methods  of 
trade,  or  that  was  so  intended. 

In  February,  1887,  Congress  passed  the  first  act  for 
the  regulation  of  interstate  commerce,  thus  asserting 
its  constitutional  power  over  national  industry  upon 
the  ground  of  its  interstate,  as  distinguished  from  its 
purely  local  character.  Two  years  later  the  State  of 
Maine  enacted  a  statute  that  prohibited,  in  general 


ANTI-TRUST    LEGISLATION    FUTILE  171 

terms,  trusts  and  other  trade  combinations  that  might 
be  contrary  to  public  policy.  In  1890,  Congress  passed 
the  Federal  anti-trust  enactment,  that  is  generally 
known  as  the  Sherman  Law. 

Following  close  upon  these  Congressional  and 
Legislative  actions,  other  States  and  territories,  as  well 
as  the  Dominion  of  Canada,  placed  anti-trust  laws  upon 
their  statute  books  before  the  close  of  the  year  1899. 
Several  States  have  anti-monopoly  provisions  in  their 
constitutions,  but  fully  a  third  have  either  manifested 
a  disposition  to  rely  upon  the  principles  of  common 
law  in  the  treatment  of  trusts  and  monopolies,  or  else 
have  definitely  declined  to  consider  at  all  the  advis- 
ability of  any  legislation. 

Federal  ^e  so-called  Sherman  anti-trust  act  of  July 

Anti-Trust  .2,  1890,  constitutes  the  only  practical  fed- 

Legislation  eral   iegisiation   on   the   subject  of  trusts, 

monopolies  and  combinations.  The  act  makes  illegal 
and  prohibits,  under  penalty  of  a  fine  not  exceeding 
five  thousand  dollars,  or  imprisonment  not  exceeding 
one  year,  or  both,  "every  contract,  combination  in  the 
form  of  trust  or  otherwise,  or  conspiracy,  in  restraint 
of  trade  or  commerce  among  the  several  States  or  with 
foreign  nations,"  and  every  attempt  "to  monopolize 
any  part  of  the  trade  or  commerce  among  the  several 
States  or  with  foreign  nations."  This  language  is  cal- 
culated to  create  the  impression  that  every  trust,  com- 
bination and  monopoly  which,  in  the  course  of  its  busi- 
ness dealings,  engages  in  commerce  in  more  than  one 
State,  is  within  the  prohibitions  of  the  act.  But  further 
consideration  demonstrates  clearly  that  this  is  not  the 
fact.  The  phrases  "among  the  several  States"  and 
"with  foreign  nations"  are  copied  from  the  commerce 


ITS  THE    OTHER    SIDE 

clause  of  the  Constitution,  which  declares  "the  Con- 
gress shall  have  power  to  regulate  commerce  with  for- 
eign nations  and  among  the  several  States."  Long  be- 
fore the  passage  of  the  Sherman  act,  long  before  the 
modern  trust  had  made  its  appearance,  this  commerce 
clause  had  been  the  subject  of  repeated  judicial  con- 
sideration, and  the  phrase  "commerce  among  the  sev- 
eral States,"  had  become  fixed  and  crystallized  as 
equivalent  to  "commerce  between  the  several  States" 
— those  acts,  dealings  and  transactions  directly  in- 
volved in  effectuating  the  transfer  of  persons,  property 
or  value  across  one  or  more  State  lines;  in  short,  "in- 
terstate commerce,"  as  distinguished  from  "that  com- 
merce which  is  completely  internal,  which  is  carried  on 
between  man  and  man  in  a  State  or  between  different 
parts  of  the  same  State." 

Anti-Trust  Lecis-  *n  ^e  severa^  individual  States  of  the  Union 
lation  by  anti-trust  legislation  did  not  follow  closely 

Individual  States  or  forcibly  the  action  of  the  Congress.  En- 
actments in  the  early  nineties,  and  for  two  or  three 
years  previously,  were,  for  the  most  part,  inconsequen- 
tial. The  public  scarcely  realized  at  that  time  what 
trusts  were  or  how  they  ought  to  be  dealt  with.  Public 
opinion  had  not  been  stirred  up  very  strongly  against 
them.  Most  attempts  at  legislation  were  of  a  tentative 
character.  Legislatures  were  feeling  their  way,  being 
impelled  to  do  something,  but  not  knowing  exactly 
what  might  be  the  best  and  safest  thing  to  do. 

By  far,  the  greatest  portion  of  the  strong  anti-trust 
legislation  belongs  to  the  last  half  of  the  closing  de- 
cade of  the  century.  Where  it  was  initiated  earlier  than 
that,  it  was  amplified,  modified  or  strengthened  in  the 
laterperiod.  A  brief  recapitulation  of  the  essential  feat- 


ANTI-TRUST    LEGISLATION    FUTILE  173 

ures  of  this  State  legislation  will,  no  doubt,  be  found 
interesting,  as  indicating  to  a  considerable  degree  the 
trend  of  public  opinion  during  the  decade. 
Alabama's  Law  ^n  Alabama  anti-trust  legislation  has  been 
Against  Insurance  confined  to  a  law  prohibiting  combinations 
Combinations  m  insurance  companies  for  fixing  and  main- 
taining rates.  This  was  approved  in  February,  1897. 
According  to  the  preamble  of  the  statute  it  was  en- 
acted "against  combinations,  conspiracies  and  agree- 
ments between  insurers,  whereby  rates  of  insurance  are 
raised  or  fixed  by  such  practices  *  *  *  in  order 
to  suppress  such  combinations,  conspiracies  and  agree- 
ments to  the  end  that  competition  in  business  shall 
alone  make  such  rates."  It  is  provided  that  the  parties 
insured  may  recover  twenty-five  per  cent,  over  and 
above  actual  loss  or  damage  in  any  case,  provided  that 
it  shall  be  shown  that  the  insuring  company  was  in  any 
way  connected  with  any  tariff  association  or  was 
working  with  any  understanding  respecting  rates  with 
other  insurers. 

Drastic  Provisions  In  March'  l897>  the  Legislature  of  Arkansas 
of  the  Arkansas  passed  an  act  to  prevent  combinations  of 
^  trusts  and  corporations,  in  which  it  was  de- 

clared that  all  arrangements  tending  to  restrain  free 
competition  in  the  trade  in  articles  of  domestic  growth 
or  domestic  raw  material  were  against  public  policy, 
unlawful  and  void.  Violation  of  the  act  was  punished 
by  a  fine  of  from  $500  to  $2,000,  or  by  imprisonment 
in  the  penitentiary  from  one  to  ten  years.  The  act  did 
not  apply  to  agricultural  products  nor  live  stock,  and 
the  right  was  given  to  any  person  injured  by  any  such 
trust  or  combination  to  sue  for  and  recover  the  amount 
paid  for  any  goods  purchased  therefrom. 


IT4  THE    OTHER    SIDE 

In  March,  1899,  this  act  was  superseded  by  "an  act 
providing  for  the  punishment  of  pools,  trusts  and  con- 
spiracies, to  control  prices  and  as  to  evidence  and 
prosecution  in  such  cases."  This  act  defines  in  the 
most  exhaustive  manner  what  should  be  regarded  as 
constituting  a  pool,  trust  or  understanding.  It  is  made 
to  cover  every  combination  of  any  kind  whatsoever,  to 
regulate  or  fix  the  price  "of  any  article  of  manufacture, 
mechanism,  merchandise,  commodity,  convenience,  re- 
pair, any  product  of  mining  or  any  article  or  thing 
whatsoever,  or  the  price  or  premium  to  be  paid  for  in- 
suring," and  so  on. 

The  penalty  for  violation  of  the  act  is  a  fine  of  not 
less  than  $200  nor  more  than  $5,000  for  every  such 
offense,  every  day  that  any  such  agreement  should  be 
continued  being  regarded  as  a  separate  offense.  The 
law  further  provides  that  any  domestic  corporation  vio- 
lating the  provisions  of  the  act,  shall  forfeit  its  corpor- 
ate rights  and  franchises,  or  if  a  foreign  corporation 
shall  be  denied  the  privilege  of  continuing  business  in 
the  State.  Provision  is  made  for  securing  annual  affi- 
davits from  the  president,  secretary  or  treasurer  of  in- 
corporated companies  doing  business  in  the  State,  to 
the  effect  that  they  have  not  entered  into  any  combina- 
tions in  violation  of  this  law. 

The  State  of  Georgia  has  an  act  that  was 
Passed  in  December,  1896.  It  declares  un- 
lawful and  void  all  arrangements,  contracts, 
agreements,  trusts,  or  combinations  made  with  a  view 
to  lessen,  or  which  tend  to  lessen,  free  competition  in 
the  importation  or  sale  of  articles  imported  into  the 
State,  or  in  the  manufacture  or  sale  of  articles  of  do- 
mestic growth  or  of  domestic  raw  material ;  all  arrange- 


ANTI-TRUST    LEGISLATION    FUTILE  175 

ments,  contracts,  agreements,  trusts  or  combinations 
between  persons  or  corporations  designed,  or  which 
tend  to  advance,  reduce  or  control  the  price  of  such 
product  or  article  to  producer  or  consumer  of  any 
such  production  or  article;  provides  for  the  forfeiture 
of  the  charter  and  franchise  of  any  offending  domestic 
corporation;  prohibits  every  offending  foreign  cor- 
poration from  doing  business  in  the  State;  requires 
the  Attorney-General  to  institute  legal  proceedings 
against  any  corporations  violating  the  act,  and  to  en- 
force the  penalties  prescribed. 

A  fine  of  from  $100  to  $5,000  and  penitentiary  im- 
prisonment of  from  one  to  ten  years  is  provided  as 
punishment  for  any  person  violating  the  act. 

The  Legislature  of  Iowa  passed  an  act  that 
Iowa  Sets  a  . 

Pattern  for  Other  was  approved  by  the    Governor    m    May, 
states  1890,  "for  the  punishment  of  pools,  trusts, 

combinations  and  conspiracies."  Its  definition  of 
what  constitutes  conspiracy  under  the  terms  of  the 
statute  does  not  materially  differ  from  those  of  Geor- 
gia or  Indiana  and  may  have  been  a  pattern  for  those 
States.  It  provides  that  any  corporation,  partnership, 
individual  or  association  that  shall  enter  into  any 
agreement  to  fix  or  limit  the  amount  or  quantity  of  any 
article  to  be  manufactured,  raised,  produced  or  sold 
in  the  State  shall  be  deemed  and  adjudged  guilty  of 
a  conspiracy  to  defraud.  Corporations  are  prohibited 
from  issuing  or  owning  trust  certificates  or  from  plac- 
ing their  affairs  in  the  hands  of  trustees  with  intent 
to  limit  or  fix  the  price  or  lessen  the  production  of 
any  articles.  Corporations  or  associations  violating  the 
act  are  punishable  by  a  fine  of  from  one  per  cent,  to 
twenty  per  cent,  of  the  capital  stock  or  amount  in- 


176  THE    OTHER    SIDE 

vested  in  the  company,  and  individuals  are  punish- 
able by  a  fine  of  from  $500  to  $5,000  and  may  be  pun- 
ished in  addition  by  imprisonment  for  one  year  or  less. 
The  law  of  the  State    of    Michigan    was 

Passed  in  l889-  The  first  section  of  the 
statute  provides  that  all  contracts,  agree- 
ments, understandings  and  combinations  entered  into 
by  any  parties  with  the  purpose  to  limit,  control,  or  in 
any  manner  to  restrict  or  regulate  production  in  any 
branch  of  mining,  manufacture,  agriculture,  business 
or  labor,  or  to  increase  or  regulate  market  prices,  or  to 
prevent  or  restrict  free  competition,  shall  be  illegal 
and  void,  and  that  every  such  contract  or  agreement 
shall  constitute  a  criminal  conspiracy.  Any  indi- 
viduals engaging  in  any  such  agreements  are  deemed 
a  party  to  such  conspiracy  and  are  punishable  by  a 
fine  of  from  $50  to  $300  or  by  six  months'  imprison- 
ment, or  by  both  fine  and  imprisonment.  Domestic 
corporations  violating  the  act  thereby  forfeit  their 
charters.  Agricultural  products  or  live  stock,  while 
in  the  hands  of  their  producers  or  raisers,  are  not 
held  under  the  provisions  of  the  act,  and  labor  societies 
and  organizations  are  especially  exempted. 

Severe  Penalties  The  ori£inal  anti-trust  statute  for  the  State 
of  the  Illinois  of  Illinois  was  passed  in  1891  and  was 
Law  amended  in  1897.  It  is  entitled  "an  act  to 

provide  for  the  punishment  of  persons,  co-partner- 
ships or  corporations  forming  pools,  trusts  and  com- 
bines,' and  forbids  the  combination  of  corporations 
organized  under  the  laws  of  that  or  any  other  State 
or  any  association  of  persons  for  the  purpose  of  regu- 
lating or  fixing  the  price  of  any  article  of  merchan- 
dise or  commodity,  or  entering  into  any  pool,  agree- 


ANTI-TRUST    LEGISLATION    FUTILE  1TT 

ment,  contract,  or  combination,  to  fix  or  limit  the 
amount  or  quantity  of  any  article,  commodity  or  mer- 
chandise to  be  manufactured,  mined,  produced  or  sold 
in  the  State. 

Violation  of  this  act  comes  under  the  head  of  con- 
spiracy, and  a  guilty  corporation  may  be  punished  by  a 
fine  of  not  less  than  $500  nor  more  than  $2,000  for  the 
first  offense;  a  fine  of  from  $2,000  to  $5,000  for  the 
second;  from  $5,000  to  $10,000  for  the  third  offense, 
and  $15,000  for  each  subsequent  offense.  Individuals 
or  officers  of  corporations,  firms  or  associations  vio- 
lating this  act  may  also  be  fined  from  $200  to  $1,000 
or  imprisoned  in  the  county  jail,  or  both. 

The  State  of  Maine  has  the  credit  of  enact- 
First state  Anti-  j  the  first  anti-trust  law  that  was  put 
Trust  Law 

upon  the  statute  books  of  any  State.    It  was 

passed  in  1889  and  is  of  sweeping  character.  It  pro- 
vides that  "it  shall  be  unlawful  for  any  firm  or  incor- 
porated company,  or  any  number  of  firms  or  incor- 
porated companies,  or  any  unincorporated  company, 
or  association  of  persons  or  stockholders  organized 
for  the  purpose  of  manufacturing,  producing,  refining 
or  mining  any  article  of  product  which  enters  into 
general  use  and  consumption  by  the  people,  to  form 
or  organize  any  trust,  or  to  enter  into  any  combination 
of  firms,  incorporated  or  unincorporated  companies 
or  association  of  stockholders,  or  to  relegate  to  any 
one  or  more  board  or  boards  of  trustees  or  directors 
the  power  to  conduct  and  direct  the  business  of  the 
whole  number  of  firms,  corporations,  companies  or 
associations  which  may  have  formed,  or  which  may 
propose  to  form,  a  trust,  combination  or  association 
inconsistent  with  the  provisions  of  this  section,  con- 
trary to  public  policy." 


178  THE    OTHER    SIDE 

The  State  of  Kentucky  has  an  anti-trust 

Provisions  of  the  statute  that  was   passed  in    1890.      It   is 
Kentucky  Law  . 

designed  to  prevent  the  establishment    of 

pools,  trusts  and  conspiracies.  It  provides  that  no 
corporation,  partnership,  company,  firm,  individual  or 
association  shall  enter  into  any  agreement  with  other 
corporations,  partnerships  or  associations  for  the  pur- 
pose of  regulating  or  controlling  or  fixing  the  price 
of  any  merchandise,  manufacture  or  articles  of  prop- 
erty. Offenders  of  the  act  are  deemed  guilty  of  the 
crime  of  conspiracy. 

Corporations  are  forbidden  to  issue,  own,  have  or 
sell  trust  certificates  or  to  put  the  control  of  any  part 
of  their  business  or  products  in  the  hands  of  trustees. 
Any  offending  corporation  is  subject  to  a  fine  of  from 
$500  to  $5,000,  and  any  individual  offender  is  subject 
to  similar  fines  or  to  from  six  to  twelve  months'  im- 
prisonment or  to  both  penalties.  Contracts  in  contra- 
vention of  the  act  are  declared  to  be  void,  and  pur- 
chasers from  any  such  corporations  or  firms  or  indi- 
viduals are  not  held  liable  for  the  payment  of  the  goods 
that  they  obtain.  Forfeiture  of  charter,  franchise  and 
corporate  existence  is  further  provided  for  in  case  of 
offending  corporations. 

Fro    ..  In  1892  the  enacted  code  of  the  general 

General  Statutes  statute  laws  of  the  State  of  Mississippi  was 
of  Mississippi  adopted,  and  in  1897  was  amended.  The 
anti-trust  legislation  of  the  State  is  contained  therein. 
One  section  of  this  code  defines  a  trust  and  combine 
as  "a  combination,  contract,  understanding  or  agree- 
ment, expressed  or  implied,  between  two  or  more  per- 
sons, corporations  or  firms  or  associations  of  persons, 
or  between  one  or  more  of  either  with  one  or  more  of 


ANTI-TRUST    LEGISLATION    FUTILE  178 

the  others"  in  restraint  of  trade  to  limit,  increase  or  re- 
duce price,  production  or  output,  to  hinder  compe- 
tition, to  increase  or  forestall  a  commodity,  to  issue  or 
hold  certificates  of  stock  of  any  trust  or  combine,  to 
place  the  control  of  business  in  the  power  of  trustees 
or  to  unite  to  pool  interests." 

Any  such  action  is  declared  to  be  a  criminal  con- 
spiracy. Those  engaged  in  husbandry,  in  dealing  with 
their  own  commodities,  and  also  labor  organizations, 
are  exempted  from  the  provision  of  this  act.  An  off  end- 
ing domestic  corporation  forfeits  its  charter  and 
offending  foreign  corporations  forfeit  their  rights  to 
do  further  business  in  the  State. 

The  State  of  Missouri  has  been  particularly 
^Missouri*  ^  conspicuous  f°r  its  drastic  anti-trust  legis- 
lation. The  original  measure  of  that  State 
was  in  the  revised  statutes  of  1889.  A  stronger  statute 
was  passed  in  1891  and  this  was  amended  in  1895  and 
in  1897.  The  first  section  of  the  act  provides  in  the 
most  sweeping  terms  against  any  pools,  trusts,  agree- 
ments or  understandings  for  regulating  or  fixing 
prices  or  insurance  rates.  Entering  into  any  arrange- 
ment for  dealing  in  any  particular  article  to  the  exclu- 
sion of  other  and  competing  articles  is  declared  to  be 
an  act  of  conspiracy  to  defraud.  The  issuing  or  own- 
ing of  trust  certificates  or  the  placing  of  business  in  the 
hands  of  trustees  is  also  prohibited. 

A  penalty  of  from  $5  to  $100  for  each  day  of  viola- 
tion of  the  act  is  decreed;  contracts  or  agreements 
made  in  violation  of  it  are  declared  void;  purchasers 
from  any  offending  individual  or  corporation  are  freed 
from  any  claim  for  goods  that  they  have  bought: 
offending  domestic  corporations  forfeit  their  corporate 


180  THE    OTHER    SIDE 

rights  and  franchises,  and  offending  foreign  corpora- 
tions are  refused  permission  to  do  further  business  in 
the  State. 

It  is  also  specifically  provided  that  whenever  the 
rights  of  a  corporation  shall  have  been  thus  forfeited 
it  shall  be  a  felony  for  any  one  to  deal  in  any  article 
made  by  the  successor  or  assigns  of  any  such  corpora- 
tion. The  penalties  provided  are  imprisonment  in  the 
penitentiary  for  a  term  not  exceeding  three  years,  im- 
prisonment in  jail  not  exceeding  one  year,  or  a  fine  of 
$100  to  $1,000,  or  both  fine  and  imprisonment.  Cor- 
porations are  compelled  to  make  yearly  affidavit 
whether  they  have  done  any  business  in  the  State  with 
any  trust  or  combination.  Five  additional  acts  were 
passed  by  the  Legislature  of  1899.  These  were  prin- 
cipally for  the  purpose  of  strengthening  the  original 
statute  and  improving  the  methods  of  procedure 
under  it. 

Miscellaneous  TexaS  haS  a  StatUte  that  rivals  that  °f 
Provisions  of  the  Missouri  in  its  sweeping,  stringent  pro- 
Texas  Law  visions.  It  enacts  that  any  corporation, 
partnership,  individual  or  association  that  shall  be- 
come a  party  to  any  pools,  trusts  or  understandings 
to  regulate  or  fix  prices  of  any  commodity,  or  the 
price  of  premiums  for  insurance,  or  to  fix  or  limit  the 
amount  or  quantity  of  any  commodity  or  premium, 
shall  be  deemed  and  adjudged  guilty  of  a  conspiracy 
to  defraud.  Monopoly  is  defined  to  be  "any  union  or 
combination  of  capital,  credit,  property,  assets,  trade 
or  custom,  skill  or  act,  or  of  any  other  valuable  thing 
whereby  any  one  or  more  of  the  things  prohibited  by 
this  act  are  accomplished  or  sought  to  be  accom- 
plished or  which  tend  to  produce  results  herein  pro- 
hibited," 


ANTI-TRUST    LEGISLATION    FUTILE  181 

The  act  prohibits  manufacturers  from  selling  at  less 
than  cost  or  giving  away  any  article  made  from  raw 
material  produced  in  the  State,  for  the  purpose  of  in- 
juring competitors;  prohibits  pools  to  control  prices 
or  to  boycott  competitors;  forbids  any  news  associa- 
tion to  withhold  its  news  from  any  publisher,  because 
he  is  not  a  member  of  such  association ;  requires  every 
owner  of  a  patent  relating  to  any  raw  material  pro- 
duced in  Texas  to  place  the  same  on  the  market  so 
that  no  monopoly  shall  exist  and  prohibits  the  sale 
or  delivery  or  disposition  of  any  articles  manufactured 
within  the  State  or  elsewhere  in  violation  of  the  act. 
Severe  penalties  are  attached. 

The  statute  of  New  York  bears  date  of  May 
7'  l89?'  and  provides  that  every  contract, 
agreement,  arrangement  or  combination, 
whereby  a  monopoly  may  be  created  or  competition 
restrained  or  prevented,  is  against  public  policy,  illegal 
and  void.  The  penalty  fixed  for  violation  of  statute  in 
the  case  of  a  natural  person  is  a  fine  not  exceeding 
$5,000,  or  imprisonment,  not  longer  than  one  year,  or 
by  both  fine  and  imprisonment.  For  a  corporation, 
the  punishment  is  a  fine  not  exceeding  $5,000. 

The  statute  of  Ohio  was  enacted  in  1898.  It  enters 
into  a  detailed  definition  of  what  constitutes  a  trust 
and  provides  for  criminal  penalties  and  civil  damages 
and  the  punishment  of  corporations,  firms,  persons  or 
associations.  A  trust  is  defined  as  a  combination  to 
create  or  carry  out  restrictions  in  trade  or  commerce, 
to  limit  or  reduce  production,  to  increase  or  reduce 
rates,  to  prevent  competition,  to  fix  standards  by 
which  to  control  prices,  or  make  any  contracts  or 
agreements  that  shall  preclude  free  and  unrestricted 


188  THE    OTHER    SIDE 

competition.  Forfeiture  of  charter  in  the  case  of  do- 
mestic corporations  and  of  the  right  to  do  business  in 
the  State  in  the  case  of  foreign  corporations  is  pro- 
vided. The  punishment  for  violation  of  the  law  is  a 
fine  of  from  $50  to  $5,000,  or  imprisonment  from  six 
months  to  one  year,  or  both. 

The  Laws  of  ^e  comP^ed  statutes  of  Nebraska  for  1895 
Nebraska,  Kansas  contained  a  law  relating  to  trusts.  This 
and  Montana  wag  repealed  by  the  act  of  April  8j  l8Q7> 

Section  one  of  the  later  act  defines  a  trust  as  "a  com- 
bination of  capital,  skill  or  goods  to  fix  the  price  of  any 
article  or  commodity  of  trade  with  intent  to  prevent 
others  from  conducting  or  carrying  on  the  same  busi- 
ness," or  a  combination  to  create  restrictions  in  trade, 
to  limit  or  reduce  production  of  prices,  to  prevent 
competition  in  insurance  or  manufacture,  transporta- 
tion, and  so  on,  or  to  control  wholesale  or  retail  prices 
in  any  manner  whatsoever. 

"An  act  defining  and  prohibiting  trusts,"  passed  by 
the  Legislature  of  Kansas  in  1897,  designates  a  trust 
as  "a  combination  of  capital,  skill  or  acts,  by  two  or 
more  persons,  firms,  corporations  or  associations  of 
persons,  or  either  two  of  them"  to  create  or  carry  out 
restrictions  for  the  full  and  free  pursuit  of  business,  to 
increase  or  reduce  the  price  of  merchandise  or  to  con- 
trol the  rate  of  insurance,  to  prevent  competition  in 
manufacture,  transportation,  or  buying  and  selling,  to 
fix  any  standard  whereby  price  shall  be  controlled  or 
established  or  to  enter  into  any  agreement  not  to  sell 
or  manufacture  or  to  keep  a  price  at  a  fixed  figure  or 
to  do  anything  to  preclude  free  and  unrestricted  com- 
petition. 

In  Montana  the  law  which  is  found  in  the  Penal 


ANTI-TRUST    LEGISLATION    FUTILE  183 

Code  of  the  State,  provides  in  general  terms  very  simi- 
lar to  that  of  most  States  against  the  organization  of 
trusts  or  the  making  of  agreements  in  any  form  what- 
soever to  restrict  production,  control  prices,  to  create 
monopolies,  or  to  interfere  with  free  competition.  The 
penalties  for  violation  of  the  act  are,  imprisonment  in 
the  State  prison  for  not  exceeding  five  years  or  a  fine  not 
exceeding  $10,000,  or  by  both  fine  and  imprisonment. 
In  1891  the  Legislature  of  Minnesota 
d  Passed  an  act  to  prohibit  pools  and  trusts. 
This  statute  decrees  that  no  corporation, 
partnership  or  individual  shall  become  a  party  to  any 
agreement  "to  regulate  or  fix  the  price  of  oil,  lumber, 
coal,  grain,  flour,  provisions,  or  any  other  commodity 
or  article  whatever,"  or  "to  fix  or  limit  the  amount  of 
any  commodity  or  article  to  be  manufactured,  mined, 
produced  or  sold  in  the  State."  Any  offending  person 
or  corporation  is  deemed  guilty  of  a  conspiracy  to  de- 
fraud and  is  subject  to  a  fine  of  $100  to  $5,000. 

The  Indiana  law  bearing  upon  this  subject  is  almost 
identical  in  its  terms  and  provisions  with  the  anti-trust 
statute  of  Georgia.  It  was  enacted  in  March,  1897. 
It  provides  for  the  forfeiture  of  the  charter  and  fran- 
chise of  any  domestic  corporation  violating  the  pro- 
visions of  the  act  and  prohibits  every  foreign  corpora- 
tion that  may  have  so  violated  from  doing  further 
business  in  the  State.  Violation  of  the  act  is  declared 
to  be  "destructive  of  full  and  free  competition  and  a 
conspiracy  against  trade  and  persons  who  engage  in 
any  such  conspiracy,  or  who  shall  in  any  capacity 
whatever  knowingly  carry  out  any  of  the  purposes 
herein  prohibited,  shall,  on  conviction,  be  fined  from 
$100  to  $5,000  and  imprisoned  in  the  penitentiary 


184  THE    OTHER    SIDE 

from  five  to  ten  years."  The  act  does  not  apply  to 
agricultural  products  while  in  the  possession  of  the 
producer  or  raiser. 

The  law  of  the  State  of  Louisiana  that  was 
Louisiana  and 

New  Mexico  En-  approved  in  July,   1892,  provides    that    it 
actments  g^^j  j^  unlawful  to  "create  or  carry  out 

restrictions  in  trade,  to  limit  or  reduce  the  production 
or  increase  or  reduce  the  price  of  merchandise,  prod- 
uce or  commodities,  to  prevent  competition  in  manu- 
facture, making,  transportation,  sale  or  purchase; 
*  *  *  to  fix  any  standard  or  figure  where  price 
shall  be  in  any  manner  controlled  or  established,  or  to 
make  or  enter  into  or  execute  or  carry  out  any  con- 
tract, obligation  or  agreement  of  any  kind  or  descrip- 
tion," not  to  sell  below  a  common  standard  or  to  keep 
the  price  at  a  fixed  figure,  or  in  any  way  to  preclude 
free  and  unrestricted  competition. 

The  anti-trust  statute  of  New  Mexico  was  approved 
February  4,  1891.  It  declares  to  be  illegal  any  and 
every  contract  or  combination  "which  shall  operate 
to  restrict  trade  or  commerce  or  control  the  quantity, 
price  or  exchange  of  any  article  of  manufacture  or 
product  of  the  soil  or  mine."  Violations  of  the  law 
are  punishable  by  a  fine  not  exceeding  $1,000  nor  less 
than  $100,  and  by  imprisonment  at  hard  labor  not  ex- 
ceeding one  year,  or  until  such  fine  has  been  paid. 
Monopoly  and  attempt  at  monopoly  are  decreed  to  be 
misdemeanors. 
Constitutional  The  provision  of  the  State  of  Idaho  against 

M°U  ision,isi2f  u    trusts  is  contained  in  the  State  Constitution 
Idaho  and  Wash- 

ington  that  was  adopted  in  August,  1889.    Article 

eleven  of  this  Constitution  provides  that  railroads  and 
express  companies  shall  be  subject  to  legislative  con- 


ANTI-TRUST    LEGISLATION    FUTILE  186 

trol  and  that  any  association  or  corporation  shall  have 
the  right  to  construct  and  operate  railroads  in  the 
State,  thus  opening  transportation  within  the  State 
to  free  competition.  It  also  provides  against  discrim- 
ination in  charges  or  facilities  for  transportation  of 
freight  or  passengers.  In  regard  to  corporations  in 
general  the  Constitution  declares  that  no  incorporated 
company  or  association  shall  combine  with  any  other 
incorporated  company  in  any  manner  whatsoever  for 
the  purpose  of  fixing  the  price  or  regulating  the  pro- 
duction of  any  article  of  commerce  or  of  produce  of  the 
soil,  or  of  consumption  by  the  people. 

The  State  of  Washington  has  no  statute  law  in  rela- 
tion to  trusts.  The  constitution  of  the  State  provides 
that  "monopolies  and  trusts  shall  never  be  allowed  in 
this  State  and  that  no  incorporated  company,  co-part- 
nership or  association  of  persons  in  this  State  shall 
directly  or  indirectly  combine  or  make  any  contract 
with  any  other  incorporated  company,  foreign  or  do- 
mestic, through  their  stockholders  or  the  trustee  or 
assignees  of  such  stockholders  or  with  any  co-partner- 
ship or  association  of  persons  or  in  any  manner  what- 
ever for  the  purpose  of  fixing  the  price  or  limiting  the 
production  or  regulating  the  transportation  of  any 
product  or  commodities."  In  1895  an  act  was  passed 
by  the  Legislature  forbidding  any  combinations,  for 
the  purpose  of  affecting  prices  or  regulating  sup- 
plies of  farm,  dairy,  orchard  or  garden  produce. 

Several  of  the  States  have  statutes  that  are 
Anti-Trust  Legis-  .  . 

lation  in  Other     essentially  alike  in  their  general  provisions, 

states  varying  principally   in   their   phraseology. 

The  statute  of  North  Carolina  was  enacted  in  1889. 
It  forbids  all  combinations  and  trusts  to  be  formed  or 


18C  THE    OTHER    SIDE 

carried  on  in  that  State.  The  act  of  North  Dakota 
dates  from  March  9,  1897.  It  declares  that  all  arrange- 
ments, agreements  or  combinations,  and  so  on,  made 
with  a  view  to  lessen  or  tending  to  lessen  full  or  free 
competition  or  to  affect  prices  are  unlawful. 

The  Oklahoma  statute  was  enacted  in  1890,  and  is 
of  similar  tenor  to  those  just  noted.  It  specifically 
designates  provisions,  food,  fuel,  lumber  or  other 
building  materials  as  commodities,  the  competition  in 
which  must  not  be  restricted.  The  penalty  for  the 
violation  of  the  act  is  a  fine  of  from  $50  to  $500.  South 
Carolina  has  an  act  that  was  approved  February  25, 
1897.  The  statute  of  South  Dakota,  drawn  in  1897, 
was  enacted  to  enforce  a  section  of  the  constitution  of 
the  State,  prohibiting  trusts  or  monopolies.  The 
original  statute  of  Tennessee  was  approved  April  6, 
1889,  and  amended  in  1891. 

Utah  has  a  statute  enacted  in  1896  prohibiting  com- 
binations "having  for  their  object  or  effect  the  con- 
trolling of  the  prices  of  any  professional  services,  any 
products  of  the  soil  or  any  article  of  manufacture  or 
commerce  or  the  cost  of  exchange  or  transportation." 
The  statute  of  Wisconsin,  approved  April  27,  1897, 
relates  only  to  domestic  corporations  which  are  for- 
bidden from  entering  into  "any  combination  con- 
spiracy, trust,  agreement  or  contract  intended  to 
operate  in  restraint  of  any  lawful  trade  or  commerce 
carried  on  in  the  State." 

States  that  Have  Many  St*teS  in  the  Union  have  given  Prac- 
Not  Legislated     tically  no  attention  to  the  subject  of  anti- 
Against  Trusts     trust  ieg}siation.    Several  of  them  have  not 
even  considered  it  worth  while  to  have  the  matter  con- 
sidered by  their  legislators.  Arthur  W.  De  Goosh,  As- 


ANTI-TRUST    LEGISLATION    FUTILE  1OT 

sistant  Attorney-General  of  Massachusetts,  says: 
"There  is  no  special  law  in  Massachusetts  regulating 
so-called  trusts.  I  may  add  that  I  doubt  much  if 
Massachusetts  will  be  called  upon  to  pass  any  special 
law  regulating  trusts  formed  under  the  laws  of  this 
Commonwealth.  So  long  as  corporations  have  to  pay 
to  the  Commonwealth  such  a  large  franchise  tax  as  is 
now  imposed  by  the  provisions  of  the  Public  Statutes 
of  Massachusetts,  I  doubt  much  if  there  will  be  any 
trusts  formed  that  will  need  regulating." 

David  M.  Campbell,  Attorney- General  of  Colorado, 
writes:  "We  have  no  laws  in  this  State  with  reference 
to  trusts.  Our  last  Legislature  took  some  steps  in 
that  direction,  but  the  friends  of  an  anti-trust  law  were 
not  sufficiently  strong  to  secure  its  passage." 

Tirey  L.  Ford,  Attorney-General  of  the  State  of 
California,  says:  "There  has  been  no  legislation  in 
this  State  with  respect  to  trusts  as  such,  but  our  Legis- 
lature has  passed  laws  in  relation  to  combinations  in 
restraint  of  trade."  More  specifically  he  adds :  "There 
is  no  statute  in  this  State  regulating  or  prohibiting  the 
combination  or  association  of  capital  into  what  is 
known  as  trusts."  The  State  has  a  statute  prohibiting 
the  unlawful  restraint  of  trade,  but  it  is  of  strictly 
local  character. 

New  Hampshire,  Pennsylvania,  Vermont,  Connec- 
ticut, Maryland,  Virginia,  West  Virginia  and  Florida 
have  no  specific  anti-trust  statutes.  West  Virginia 
has  some  provisions  limiting  the  powers  of  corpora- 
tions and  Florida  has  a  special  law  in  regard  to  the 
beef  trust. 

Views  of  Two  ^e  su^Ject  °*  legislation  upon  trusts  en- 
Presidents  of  the  gaged  the  attention  of  the  Presidents  of  the 
United  States  United  States  who  held  office  in  the  clos- 


188  THE    OTHER    SIDE 

ing  years  of  the  nineteenth  century.  In  their  annual 
messages  to  Congress,  the  topic  was  referred  to  with 
recommendations  concerning  its  consideration. 

President  Harrison,  in  his  annual  message  of  De- 
cember, 1889,  said:  "Earnest  consideration  should  be 
given  by  Congress  to  a  consideration  of  the  question, 
how  far  the  restraint  of  these  combinations  of  capital, 
commonly  called  trusts,  is  a  matter  of  federal  juris- 
diction. When  organized,  as  they  often  are,  to  crush 
out  all  healthy  competition  and  to  monopolize  the 
production  or  sale  of  an  article  of  commerce  and  gen- 
eral necessity,  they  are  dangerous  conspiracies  against 
the  public  good  and  should  be  made  the  subject  of  pro- 
hibitory and  even  penal  legislation." 

In  his  annual  message  of  December,  1896,  President 
Cleveland  said:  "The  fact  must  be  recognized,  how- 
ever, that  all  federal  legislation  on  this  subject  may 
fall  short  of  its  purpose  because  of  inherent  obstacles, 
and  also  because  of  the  complex  character  of  our  gov- 
ernmental system,  which,  while  making  the  federal 
authority  supreme  within  its  sphere,  has  carefully 
limited  that  sphere  by  metes  and  bounds  which  can- 
not be  transgressed.  The  decision  of  our  highest  court 
on  this  precise  question  renders  it  quite  doubtful 
whether  the  evils  of  trusts  and  monopolies  can  be 
adequately  treated  by  federal  action  unless  they  seek 
directly  and  purposely  to  include  in  their  objects  trans- 
portation or  intercourse  between  States  or  between  the 
United  States  and  foreign  countries." 
President  McKin-  President  McKinley,  in  his  message  de- 
mendattonsto  h'vered  to  Congress  in  December,  1899, 
Congress  said:  "Combinations  of  capital  organized 

into  trusts  to  control  the  conditions  of  trade  among 


ANTI-TRUST    LEGISLATION    FUTILE  189 

our  citizens,  to  stifle  competition,  limit  production  and 
determine  the  prices  of  products  used  and  consumed 
by  the  people,  are  justly  provoking  public  discussion, 
and  should  early  claim  the  attention  of  the  Congress. 
*  *  *  The  subject  is  one  giving  rise  to  many  di- 
vergent views  as  to  the  nature  and  variety,  or  cause 
and  extent  of  the  injuries  to  the  public  which  may  re- 
sult from  large  combinations,  concentrating  more  or 
less  numerous  enterprises  and  establishments  which, 
previously  to  the  formation  of  the  combination,  were 
carried  on  separately. 

"It  is  universally  conceded  that  combinations  which 
engross  or  control  the  market  of  any  particular  kind 
of  merchandise  or  commodity  necessary  to  the  general 
community,  by  suppressing  natural  and  ordinary  com- 
petition, whereby  prices  are  unduly  enhanced  to  the 
general  consumer,  are  obnoxious,  not  only  to  the  com- 
mon law,  but  also  to  the  public  welfare.  There  must 
be  a  remedy  for  the  evils  involved  in  such  organiza- 
tions. If  the  present  law  can  be  extended  more  cer- 
tainly to  control  or  to  check  these  monopolies  or 
trusts,  it  should  be  done  without  delay.  Whatever 
power  the  Congress  possesses  over  this  most  impor- 
tant subject  should  be  promptly  ascertained  and  as- 
serted." 

_.  Many  political  platforms  have  dealt  with 

Declarations  of  .  ™ 

Democratic  Con-  the    subject.      The     Democratic     national 

ventions  platform  of   1896  had  this   plank:    "The 

absorption  of  wealth  by  the  few,  the  consolida- 
tion of  our  leading  railroad  systems,  and  the  formation 
of  trusts  and  pools,  require  a  stricter  control  by  the 
Federal  Government,  of  those  arteries  of  commerce. 
We  demand  the  enlargement  of  the  powers  of  the 


190  ,THE    OTHER    SIDE 

Interstate  Commerce  Commission  and  such  restric- 
tions and  guarantees  in  the  control  of  railroads  as  will 
protect  the  people  from  robbery  and  oppression." 

Several  Democratic  State  conventions  in  1899  gave 
voice  to  their  sentiments  upon  this  subject.  The  con- 
vention of  Iowa  demanded  that  trusts  should  be  "sup- 
pressed by  the  repeal  of  the  protective  tariff,  and  other 
privilege-conferring  legislation  responsible  for  them, 
and  by  the  enactment  of  such  legislation,  State  and 
national,  as  will  aid  in  their  destruction."  The  Ken- 
tucky convention  expressed  its  opinion  in  favor  of  the 
destruction  of  trusts. 

The  Maryland  convention  said:  "We  favor  vigor- 
ous measures  by  the  State  and  by  Congress  to  repress 
this  great  and  growing  evil."  The  Democrats  of 
Massachusetts  said:  "We  pledge  ourselves  to  give 
due  trial  to  such  remedies  as  may  hasten  the  disin- 
tegration of  trusts,"  suggesting  compulsory  publicity, 
prohibition  of  different  prices  in  different  States,  and  a 
more  rigid  enforcement  of  the  law  against  railroad 
discrimination.  The  Nebraska  Democrats  demanded 
a  constitutional  amendment  to  prevent  the  monopoli- 
zation of  industry. 

The  Ohio  Democrats  demanded  "all  articles,  the 

prices  of  which  are  controlled  by  trusts,  to  be  placed  on 

the  free  list."    The  Democrats  of  Pennsylvania  held 

that  "all  combinations  of  capital  calculated  to  produce 

monopoly  or  restrain  trade  should  be  regulated  and 

limited  by  proper  legislation,  if  their  establishment 

cannot  be  constitutionally  prevented." 

Planks  from         ^e  ^owa  Republicans  of    1899    declared 

Republican  State    "when  the  business    aggregations,  known 

Platforms  ag  trusts>  prove  hurtful  to  the  people,  they 


ANTI-TRUST    LEGISLATION    FUTILE  191 

must  be  restrained  by  national  laws,  and  if  need  be, 
abolished."  The  Republicans  of  Kentucky  pledged 
themselves  "to  the  enactment  of  all  such  laws  as  may 
be  necessary  to  prevent  trusts,  pools,  combinations  or 
other  organizations,  from  combining  to  depreciate  be- 
low its  real  value  or  to  enhance  the  cost  of  any  article 
or  to  reduce  the  proper  emoluments  of  labor." 

In  Maryland  the  Republicans  announced  themselves 
strongly  in  favor  of  "laws  to  successfully  suppress 
trusts  and  all  combinations  which  create  monopoly." 
The  Republicans  of  Massachusetts  announced  that 
their  party  "is  unqualifiedly  opposed  to  trusts  and 
monopoly  and  the  capitalization  of  fictitious  and 
speculative  valuations."  The  Republicans  of  Ne- 
braska declared  that  their  party  "opposes  trusts  and 
combinations,  having  for  their  purpose  the  stifling  of 
competition  and  arbitrarily  controlling  production  or 
fixing  prices."  In  Ohio  the  Republicans  commended 
the  action  of  the  general  Assembly  "in  passing  the 
stringent  law  now  on  our  statute  books  prohibiting 
the  organization  of  trusts,"  and  they  denounced  "such 
unlawful  combinations  as  inimical  to  the  interests  of 
the  people." 

.    c       .         Even    a    hastv    glance    over    the    imme- 
Tne  Sweeping  '  . 

TideofAnti-Trust  diate  preceding  pages  must  be  sufficient  to 

Legislation  convince  any  one  that  probably  no  insti- 

tution of  modern  times  has  ever  had  more  persistent 
and  more  forceful  opposition  waged  against  it  by 
legislation,  either  projected  or  actual,  than  have  these 
aggregations  of  capital  in  the  United  States. 

It  has  been  different  in  England  and  elsewhere  in 
Europe.  Notwithstanding  the  earlier  record  of  Eng- 
land in  respect  to  legal  enactments  restraining  trade, 


188  THE    OTHER    SIDE 

the  contemporaneous  attitude  of  that  country  has  been 
far  more  conservative  in  this  respect  than  has  been 
that  of  the  American  people.  The  trust  movement  has 
not  yet  assumed  the  proportions  on  the  other  side  the 
Atlantic  that  it  has  in  this  country  and,  naturally,  law 
and  public  opinion  has  concerned  itself  less  with  the 
subject. 

In  the  United  States,  as  we  have  just  seen,  there  has 
been  a  flood  of  legislative  enactment  with  all  the  at- 
tendant agitation  that  precedes  such  action  by  Con- 
gress and  Legislature.  Presidents  of  the  United  States 
have  joined  in  arraigning  trusts.  Governors  of  States 
have  had  their  say  in  messages  that  would  fill  volumes. 

The  ingenuity  of  some  of  the  keenest  legal  minds 
of  the  country  has  been  utilized  in  the  framing  of 
statutes  to  insure  their  constitutionality  and  their 
practical  working  power.  If  public  sentiment,  as  ex- 
pressed through  the  utterances  of  foremost  public 
officials  and  crystallized  into  actual  legal  enactments 
could  accomplish  anything,  the  course  of  the  trusts 
should  long  ago  have  been  stayed. 

After  a  contemplation  of  this  public  upris- 

Unenforced  Anti-  jnnr  as  manifested  in  the  legislation  that  has 
Trust  Laws 

been  demanded  and  placed  upon  the  statute 

books  of  so  many  States,  one  naturally  looks  to  see 
what  definite  results  have  been  attained  thereby.  What 
has  all  this  agitation  for  national  and  State  interfer- 
ence amounted  to,  and  what  has  it  really  accom- 
plished? Those  are  practical  questions,  and  the  way 
in  which  they  are  answered  by  facts  may  go  far 
toward  throwing  interesting  light  upon  the  real 
spirit  of  the  people. 

It  will  clear  the  way  to  understanding  the  subject,  if, 


ANTI-TRUST    LEGISLATION    FUTILE  108 

at  the  outset,  what  has  not  been  done,  shall  be  noted. 
The  Federal  Government,  through  the  Interstate  Com- 
merce Commission,  has  confined  its  efforts  to  the 
regulation  of  railroad  affairs.  In  the  summer  of  1899 
the  Industrial  Commission  undertook  the  investiga- 
tion of  industrial  combinations.  What  may  be  the  re- 
sult of  its  recommendations,  or  what  authority  it  may 
attempt  to  exercise,  remains,  at  the  opening  of  the 
year  of  1900,  a  question  for  the  future  to  decide. 

The  federal  anti-trust  law  of  1890  has  been  nearly  a 
dead  letter  as  far  as  it  relates  to  trusts,  pure  and  sim- 
ple. The  declaration  of  Attorney-General  Griggs, 
made  in  1899,  that  the  restraint  of  capital  that  has 
taken  the  form  of  so-called  trusts  should  be  relegated 
to  the  different  States,  still  stands  as  the  dictum  of  the 
national  authorities. 

_  . ,       .  It  has  become  evident  that  the  laws  upon 

Evidence  from 

Several  State  the  statute  books  of  the  States  are  in  many 
Attorney-Generals  mstances  ineffectual  in  accomplishing  their 
intended  purposes,  or  else  rest  there  neglected,  with- 
out any  urgent  public  demand  manifested  to  give  them 
vitality.  Statements  of  several  Attorney-Generals  se- 
cured in  connection  with  the  preparation  of  this  vol- 
ume, are  instructive  upon  this  point.  The  Attorney- 
General  of  Iowa,  says:  "I  know  of  no  action  ever 
having  been  brought  to  enforce  the  law  or  suppress  a 
trust."  The  Attorney-General  of  Michigan  writes: 
"The  law  has  never  been  passed  upon  by  the  Supreme 
Court  of  this  State." 

The  Attorney-General  of  New  Mexico  says:  "No 
action  has  ever  been  taken  in  the  courts  under  the  pro- 
visions of  this  law."  The  Attorney-General  of  North 
Dakota  writes:  "We  have  had  no  decisions  of  our 


1M  THE    OTHER    SIDE 

Supreme  Court  on  this  subject."  The  Attorney-Gen- 
eral of  South  Dakota  specifies:  "So  far  as  I  know,  no 
action  has  ever  been  taken  under  the  laws  of  this  State 
against  trusts."  The  Attorney-General  of  Louisiana 
says:  "No  action  has  ever  been  taken  under  it  that  I 
know  of."  The  Attorney-General  of  South  Carolina 
writes:  "I  know  of  no  action  which  has  ever  been 
taken  under  the  act  in  this  State  relating  to  trusts  up  to 
the  present  time." 

The  Attorney-General  of  Colorado  bears  this  testi- 
mony: "We  have  had  no  litigation  in  this  State  with 
reference  to  the  question."  Speaking  of  the  constitu- 
tional provision  against  monopolies  in  the  State  of 
Washington,  the  Attorney-General  there  says:  "The 
Legislature  has  never  seen  fit  to  provide  the  machin- 
ery to  carry  the  Constitution  into  effect."  In  Utah, 
according  to  the  Attorney-General  of  that  State,  "there 
have  been  no  decisions  upon  this  subject  by  our  State 
Supreme  Court."  The  law  upon  the  statute  books  of 
the  State  of  New  York,  that  of  1897,  has  been  declared 
by  the  courts  of  the  State  to  be  unconstitutional  and 
void. 

.  .  Court  decisions  based  upon  anti-trust  sta- 

Decisions  Under    tutes  were  not  numerous  previous  to  1900. 
the  Missouri  Law  Most  of  them  were  arrive(j  at  in  the  year 

1899  or  immediately  previous.  In  one  instance  the 
decision  was  under  the  United  States  law  of  1890. 
Other  decisions  of  most  importance  have  been  those 
of  the  State  courts,  principally  of  Illinois,  Ohio,  Ar- 
kansas, Missouri  and  Texas. 

In  August,  1899,  the  Court  of  Appeals  of  St.  Louis, 
Mo.,  rendered  a  decision  in  the  case  of  a  suit  brought 
by  the  National  Lead  Company  against  the  S.  E, 


ANTI-TRUST    LEGISLATION    FUTILE  196 

Grote  Paint  Store  Company  for  balance  due  on  ac- 
count. The  defendants  pleaded  that  the  plaintiff  cor- 
poration was  a  trust  and  was  consequently  doing  busi- 
ness in  violation  of  the  Missouri  anti-trust  law. 

Judgment  was  given  to  the  plaintiff,  but  the  Court 
of  Appeals  reversed  the  judgment  and  remanded  the 
case  for  another  trial.  The  decision  of  the  court  was 
that  although  the  trust  had  taken  the  form  of  a  single 
corporation,  it  could  not  escape  the  prohibition  and 
penalties  of  anti-trust  laws,  on  the  plea  that  it  cannot 
combine  or  conspire  with  itself.  It  was  held  that  the 
individual  members  of  the  corporation  were,  in  effect, 
conspiring  with  each  other  in  restraint  of  trade,  and 
thus  violating  the  law.  In  other  cases  in  Missouri,  the 
law  has  been  declared  constitutional,  and  heavy  fines 
have  been  assessed  against  corporations.  In  1899, 
seventy-two  foreign  fire  insurance  companies  were 
convicted  of  violating  the  law  and  were  heavily  fined. 

A  Decision  Under  The  case  of  the  Addyston  PiPe  Company 
the  Interstate        attracted  widespread  attention  in  legal  cir- 
Commercc  Law     cles  in  jg^     Under  the  federal  anti-trust 
law  the  United  States  Attorney  in  Tennessee  brought 
action  against  the  company,  alleging  restraint  of  inter- 
state commerce.    In  the  District  Court  the  defendant 
gained  a  victory,  but  the  Circuit  Court  of  Appeals, 
Justice  Harlan  and  Judge  Taft,  sitting,  reversed  the 
judgment. 

On  appeal  to  the  Supreme  Court  of  the  United 
States  the  case  was  heard  and  decided,  Justice  Peck- 
ham  delivering  the  opinion  of  December  4,  1899.  The 
defendants  were  six  corporations  with  plants  in  differ- 
ent States  and  they  had  a  close  arrangement,  although 
not  a  consolidation  into  a  single  corporation,  to  main- 


It6  THE    OTHER    SIDB 

tain  prices  and  to  refrain  from  competition  in  the 
manufacture  and  sale  of  cast  iron,  water  and  gas  pipe. 
The  Supreme  Court  held  that  this  agreement  was  in 
direct  restraint  of  interstate  commerce  and  in  violation 
of  the  federal  anti-trust  law. 

This  decision,  which  many  lawyers  think  may  have 
an  important  bearing  upon  the  subject,  was,  it  will  be 
noted,  made  strictly  upon  the  provisions  of  the  law  re- 
lating to  interstate  commerce.  It  did  not  touch  upon 
the  question  of  trusts  or  monopolies,  save  in  their 
interstate  transactions.  Other  decisions  of  the  United 
States  Supreme  Court  have  uniformly  upheld  the  con- 
tention that  the  law  fully  provides  for  the  practical  re- 
straint of  trusts,  so  far  as  the  interstate  character  of 
their  business  is  concerned. 

Under  the  Illinois  law  one  exceedingly  im- 
Thc  Illinois  Law  pOrtant  decision  was  rendered  in  October, 

1899,  when  the  Supreme  Court  of  that  State 
declared  in  favor  of  the  plaintiffs  in  the  action  of 
George  F.  Harding  and  others  against  the  American 
Glucose  Company.  It  appears  that  the  glucose  indus- 
try is  carried  on  only  in  the  corn-belt  of  the  United 
States  by  six  large  factories,  mainly  in  Illinois  and 
Iowa. 

At  Peoria,  111.,  was  the  American  Glucose  Com- 
pany, that  in  1897  was  absorbed  by  the  Glucose  Sugar 
Refining  Company,  with  the  consent  of  a  majority  of 
the  stockholders.  Several  minority  stockholders 
brought  the  suit  to  invalidate  the  sale  on  the  ground 
that  the  consent  of  the  minority  stockholders  had  not 
been  obtained  and  because  the  attempted  sale  was  a 
movement  toward  combination  in  violence  of  the  anti- 
trust statute  of  Illinois.  In  the  lower  court  the  ruling 


ANTI-TRUST    LEGISLATION    FUTILE  197 

was  against  the  plaintiffs,  but  the  Supreme  Court  re- 
versed the  decree  of  the  court  below  and  set  aside  all 
deeds  and  other  instruments  constituting  the  at- 
tempted conveyance  and  delivery  of  the  Peoria  plant 
and  business  to  the  Glucose  Sugar  Refining  Com- 
pany. 

Space  will  not  permit  of  a  complete  present- 

ati°n  °f  a11  the  le^al  decisions  that  have 
been    made    under     anti-trust     statutes. 

Enough  has  been  shown,  however,  it  is  believed,  to 
indicate  that,  so  far  as  enforcement  of  the  provisions 
of  the  laws  are  concerned,  the  actual  result  has  not 
been  at  all  commensurate  with  the  tremendous  amount 
of  agitation  and  great  volume  of  legislation  that  has 
rendered  the  closing  years  of  the  century  notable  in 
respect  to  this  subject. 

Most  of  the  laws  have  remained  dead-letter  enact- 
ments. Whether  under  the  impetus  of  some  popular 
demand  that  may  spring  into  being  from  causes  not 
yet  wholly  apparent,  they  may  be  revivified,  is  not  a  fair 
subject  for  prophecy.  Broadly  stated,  legislation  thus 
far  has  proved  its  weakness,  rather  than  its  strength, 
in  attempting  to  overthrow  trusts,  or  in  seriously  curb- 
ing the  reasonable  exercise  of  their  powers.  Legiti- 
mate business,  conducted  in  a  legitimate  manner,  to 
the  mutual  advantage  of  itself  and  the  public,  has 
been  able  to  proceed  on  its  way  with  little  more  than 
momentary  irritation  at  the  obstacles  that,  from  time 
to  time,  have  been  thrown  before  it. 

The  conclusions  to  be  derived  from  the  actual  work- 
ings of  trusts  and  the  effect  of  attempted  legislation 
against  them  are  wholly  favorable  to  the  interests  of 
consolidated  capital.  Statutes  and  judicial  decisions 


198  THE    OTHER    SIDE 

under  them  have  not  succeeded  in  suppressing  trusts 
or  combinations.  They  have  been  able  to  modify  or 
to  change  the  direction  or  form  of  operations  of  cor- 
porations that  are  broadly  classed  as  trusts,  but  be- 
yond that  point  they  have  not  exercised  influence. 
Business  has  been  able  readily  to  adjust  itself  to  what- 
soever reasonable  limitations  the  laws  have  placed 
upon  it,  and  undoubtedly  it  will  find  little  difficulty  in 
successfully  pursuing  the  same  course  in  the  future. 


NOTABLE  INDIVIDUAL  OPINIONS 

VIEWS  OF  STATESMEN,  ECONOMISTS,  BUSINESS  MEN  AND 
OTHERS-GENERAL  AGREEMENT  REGARDING  THE  PERMA- 
NENCE AND  THE  IMPORTANCE  OF  THE  PRESENT  MOVEMENT 
OF  CAPITAL— THE  SUBJECT  FRANKLY  DISCUSSED 

Wide  Attention     P°Pular  interest  in  capital,  its  powers,  its 
Given  possibilities  and  its  effects  has  resulted  in 

to  Trust  Problems  an  abundant  and  notable  increase  of  litera- 
ture pertaining  to  the  subject.  Probably  no  topic  has 
been  more  widely  discussed  during  the  last  few  years 
than  that  which  is  designated  by  the  general  title  of 
trusts.  It  may  be  further  said  that  probably  upon  no 
current  topic  is  there  so  widespread  and  general  lack 
of  knowledge  and  confusion  of  ideas. 

Something  has  been  gained,  however,  that  the  sub- 
ject is  at  last  discussed.  To-day  the  economic  value 
of  trusts  is  recognized  and  seriously  considered.  Not 
so  very  long  ago  the  only  contributions  to  the  case 
were  the  vigorous  utterances  of  those  who  denounced 
unqualifiedly  all  and  every  manifestation  of  this  latest 
economic  tendency.  Now,  however,  it  is  frankly  ad- 
mitted that  there  is  another  side  to  the  case.  A  care- 
ful study  of  the  later  expressions  of  opinion  of  econo- 
mists, statesmen,  and  others  will  go  far  to  convince  the 
unprejudiced  student  that  the  general  trend  of  opinion 

199 


200  THE    OTHER    SIDE 

is  strongly  in  favor  of  the  trust  idea.  Newspapers  and 
magazines  have  opened  their  columns  to  contributions 
on  the  subject,  and  public  men  in  the  halls  of  legisla- 
tion and  upon  the  platform  have  added  to  the  en- 
lightenment of  the  people. 

Until  the  summer  of  1899,  the  general  dis- 

fTcrcn^eonSTruste  cussion  of  this  question  proceeded  in  a 
somewhat  desultory  manner.  Wherever  an 
individual  could  get  audience,  either  in  the  public 
prints  or  upon  the  platform,  he  had  his  say.  No  seri- 
ous attempt  had  been  made  to  assemble  this  floating 
and  varying  opinion,  pro  and  con,  into  any  concrete, 
compact  form.  It  then  occurred,  however,  to  the  gen- 
tlemen composing  the  Civic  Federation  of  Chicago, 
that  a  conference  for  the  fullest  possible  discussion  of 
trusts  and  trade  combinations  from  all  standpoints  was 
eminently  desirable,  and  would  probably  be  successful 
and  highly  instructive.  Out  of  that  idea  was  born  the 
celebrated  Chicago  Conference  on  Trusts,  that  accom- 
plished more  than  even  its  most  ardent  promoters 
hoped  for  in  eliciting  opinions  from  the  leading  men  of 
the  country,  and  in  disseminating  a  widespread  knowl- 
edge of  the  subject  that  was  in  the  highest  degree  de- 
sirable. 

Among  those  who  participated  in  the  proceedings 
of  this  conference,  which  was  held  in  Chicago  in  Sep- 
tember, 1899,  were  William  Jennings  Bryan,  W. 
Bourke  Cockran,  Henry  W.  Blair,  of  New  Hampshire; 
Governor  G.  W.  Atkinson,  of  West  Virginia;  Charles 
Foster,  of  Ohio;  Francis  G.  Newlands,  of  Nevada;  J. 
Sterling  Morton,  of  Nebraska;  Cyrus  G.  Luce,  of 
Michigan;  Mayor  Samuel  M.  Jones,  of  Toledo,  Ohio; 
Governor  W.  E.  Stanley,  of  Kansas;  Governor  Hazen 


NOTABLE    INDIVIDUAL    OPINIONS  201 

S.  Pingree,  of  Michigan;  Professor  John  Graham 
Brooks,  of  the  University  of  Chicago;  Professor  John 
Bates  Clark,  of  Columbia  University;  Attorney-Gen- 
eral George  R.  Gaither,  Jr.,  of  Maryland;  Clem  Stude- 
baker,  of  South  Bend,  Ind.,  and  many  others  promi- 
nent in  the  political,  business  and  social  world. 

Opinions  from  ^n  the  Pa§es  that  immediately  follow  will 
Different  Points  be  found  extracts  from  the  public  utterances 
of  View  of  some  of  the  most  prominent  men  of  the 

day  who  have  expressed  themselves  concerning  this 
nineteenth  century  phenomenon  in  the  industrial 
world.  Many  of  these  abstracts  have  been  quoted 
from  the  addresses  made  by  their  authors  at  the  Chi- 
cago Conference.  A  mere  perusal  of  these  excerpts, 
brief  as  they  must  necessarily  be  in  this  connection, 
will  reveal  at  once  the  broad  scope  and  the  profound 
importance  of  that  gathering.  The  full  report  of  the 
proceedings  during  the  three  days'  meeting  and  of 
the  addresses  that  were  made  was  published  by  the 
Civic  Federation.  It  undoubtedly  constituted  the  most 
illuminating  contribution  that  up  to  that  time  had 
been  made  to  the  literature  of  the  subject. 

From  speeches  made  on  other  occasions,  and  from 
various  newspaper  and  magazine  contributions,  other 
extracts  that  appear  in  this  chapter  have  been  taken. 
It  is  believed  that,  together,  they  reflect  the  opinions 
of  the  majority  of  people  who  have  given  serious 
thought  to  the  subject.  Their  authors  are  representa- 
tive men  from  all  walks  of  society — capitalists,  work- 
ing men,  professional  men,  and  those  in  public  life. 
Their  views  are  not  hasty  utterances,  but  are  serious, 
well  considered  thought.  From  their  study  readers 
cannot  fail  to  derive  much  valuable  information. 


208  THE    OTHER    SIDE 

At  the  twenty-second  annual  meeting  of  the 
Gam  from  Ecoiv  ° 

omy  of  American  Paper  and  Pulp  Association,  held 

Production  in  New  York  in  February,  1899,  Professor 
Arthur  T.  Hadley,  now  president  of  Yale  University, 
read  a  paper  on  "Industrial  Combination ;  Its  Failures 
and  Successes."  He  spoke  first  of  attempts  that  have 
been  made  to  monpolize  natural  products,  such  as 
copper,  iron,  and  others,  and  their  ultimate  failure, 
and  then  went  on  to  say: 

"Combinations  of  large  plants  engaged  in  manu- 
facturing or  transportation  have  apparently  had  less 
chance  of  success.  Their  monopoly  was  a  more  pre- 
carious one,  because  it  was  in  the  power  of  others  to 
enter  the  market  and  duplicate  their  factories  or  their 
railroads.  Yet  the  proportion  of  successful  monopolies 
in  these  lines  has  been  much  greater  than  among  the 
monopolies  of  natural  products.  That  difficulty  which 
seemed  like  a  menace  to  their  stability  has  sometimes 
proved  their  salvation,  for  it  has  compelled  them  to 
seek  their  success  by  reducing  expenses  rather  than  by 
raising  prices.  In  such  combinations  the  control  of  the 
market,  which  they  were  able  to  exercise  by  an  in- 
crease or  a  limitation  of  the  output,  has  been  an  inci- 
dental rather  than  a  primary  object.  The  great  gain 
has  been  in  economy  of  production.  In  the  first  place 
they  are  able  to  avoid  unnecessary  duplication  of  plant, 
and  thus  keep  their  machinery  more  fully  occupied. 
In  the  second  place  they  can  avoid  great  variations  in 
the  amount  of  work  done  in  different  seasons — varia- 
tions which  are  sure  to  take  place  if  each  man  extends 
his  production  for  himself  on  the  basis  of  the  past  sea- 
son's experience,  without  noticing  or  knowing  that  a 
dozen  other  people  are  doing  the  same.  Finally  they 


NOTABLE    INDIVIDUAL    OPINIONS  208 

are  able  to  save  the  multiplication  of  selling  agencies 
and  the  unnecessary  expense  of  advertising,  which  is 
largely  a  result  of  duplication  of  plant  and  irregularity 
of  output. 

Success  Due  to  A11  these  are  evils  wmch  affect  the  pub- 
Progressive  lie;  and  an  industrial  combination,  by 
avoiding  these  expenses,  is  a  means  of 
public  economy  no  less  than  of  private  gain.  It 
enables  people  to  get  their  goods  with  less  actual 
labor  cost,  because  the  different  machines  are  utilized 
more  advantageously;  because  it  avoids  those  alter- 
nations of  plenty  and  scarcity,  with  attendant  fluctua- 
tions in  price,  which  are  an  evil  to  consumers  as  well 
as  producers;  and  because  it  frees  the  public  from  cer- 
tain quite  unnecessary  elements  of  incidental  expense. 
That  most  successful  combination  of  all,  the  Standard 
Oil  Company,  has  owed  its  success  to  its  progressive 
methods.  It  has  not  raised  the  price  of  oil,  but  has 
lowered  it.  Whether  the  price  of  oil  has  fallen  faster 
or  slower  than  it  would  have  done  under  free  competi- 
tion is  a  matter  on  which  there  is  room  for  difference 
of  opinion;  but  there  is  no  question  that  it  has  fallen, 
and  fallen  greatly,  and  that  the  large  profits  of  the  com- 
pany have  been  made,  not  by  raising  the  prices,  but  by 
limiting  the  expenses.  It  is  not  as  an  owner  of  oil 
wells,  limiting  the  source  of  supply,  that  it  has  made 
its  history,  but  as  an  owner  of  a  plant  for  transporting 
and  refining  oil,  which  it  has  managed  with  a  high  de- 
gree of  efficiency  and  economy. 

"There  is  no  time  to  go  into  the  history  of  a  large 
number  of  combinations  and  point  out  in  each  indi- 
vidual case  the  causes  which  have  contributed  to  their 
success  or  failure.  It  is  enough  to  say  that  the  failures 


204  THE    OTHER    SIDE 

have  in  general  been  caused  by  a  one-sided  effort  to 
raise  prices,  the  success  by  laying  stress  on  the  reduc- 
tion of  expense." 

Competition         As  long  ago  as  l889'  Andrew  Carnegie,  in 
Wages  Warfare      an  article  entitled  "The  Bugaboo  of  Trusts," 
Against  Trusts      published  in  the  North  American  Review, 
pointed  out  with  singular  prescience  some  of  the  re- 
sults that  would  follow  the  reorganizations  of  capital 
into  trusts  that  were  then  just  beginning  to    attract 
wide  and  serious  attention.  In  that  article  he  explained 
how  a  successful  trust  would  be  sure  to  invite  the  com- 
petition of  other  capital,  saying: 

"Capital  is  always  upon  the  alert,  especially  when  it 
is  bruited  about  that  a  trust  has  been  formed,  and  im- 
mediately new  manufactories  spring  up,  as  if  by  magic. 
The  more  successful  the  trust,  the  surer  these  off- 
shoots are  to  sprout.  Every  victory  is  a  defeat.  Every 
factory  that  the  trust  buys  is  the  sure  creator  of  another, 
and  so  on  ad  infinitum,  until  the  bubble  bursts.  When 
they  have  endeavored  to  raise  a  part  of  the  ocean  of 
capital  above  the  level  of  the  surrounding  waters, 
over  their  bulwarks  the  floods  have  burst,  and  capital, 
like  water,  has  again  found  its  level.  It  is  true  that  to 
regain  this  level  a  longer  or  a  shorter  period  may  be 
required,  during  which  the  article  affected  may  be  sold 
to  the  consumer  in  limited  quantities  at  a  higher  rate 
than  before  existed.  But  for  this  the  consumer  is  am- 
ply recompensed  in  the  years  that  follow,  during  which 
the  struggle  between  the  discordant  and  competitive 
factories  becomes  severer  than  it  ever  was  before,  and 
lasts  till  the  great  law  of  the  survival  of  the  fittest  vin- 
dicates itself. 

"Those  factories  and  managers  that  can  produce  to 


NOTABLE    INDIVIDUAL    OPINIONS  «» 

the  best  advantage  eventually  close  the  less  competent. 
Capital  wisely  managed  yields  its  legitimate  profit. 
After  a  time  the  growth  of  demand  enables  capital  to 
receive  an  unusual  profit.  This  in  turn  attracts  fresh 
capital  to  the  manufacture,  and  we  have  a  renewal  of 
the  old  struggle,  the  consumer  reaping  the  benefit. 
Such  is  the  law,  such  has  been  the  law,  and  such  prom- 
ises to  be  the  law  for  the  future;  for,  so  far,  no  device 
has  yet  been  devised  that  has  permanently  thwarted  its 
operation.  Given  freedom  of  competition,  and  all  com- 
binations or  trusts  that  attempt  to  exact  from  the  con- 
sumer more  than  a  legitimate  return  upon  capital  and 
services,  write  the  charter  of  their  own  defeat.  We 
have  many  proofs  that  this  great  law  does  not  sleep, 
and  that  it  will  not  be  suppressed." 

The  views  of  Chauncey  M.  Depew,  United 

J!  th«  Trust  is       States  Senator  from  New  York,  upon  the 
Good  It  Will  Live 

subject  of  corporations  have  been  often  and 

frankly  expressed  and  are  of  great  value,  arising  as 
they  do  from  his  large  experience  with  that  form  of 
industrial  enterprise.  In  an  article  in  Munsey's  Maga- 
zine, contributed  jointly  by  himself  and  the  late  Ros- 
well  P.  Flower,  he  said: 

"As  I  look  at  it,  the  trust  is  on  trial.  If  it  proves, 
like  the  corporation,  to  be  inoppressive,  and  a  neces- 
sity to  the  conduct  of  certain  operations  which  are  for 
the  public  good,  it  will  live.  If,  on  the  other  hand,  it 
oppresses  the  people,  they  will  very  quickly  put  a  stop 
to  it.  If  it  violates  public  sentiment,  it  cannot  live — 
if,  I  mean,  it  puts  into  the  hands  of  a  few  men  the 
manufacture  or  distribution  of  any  article  of  prime 
necessity,  so  that  the  American  people  feel  that  they 
are  dependent  on  any  set  of  men  for  coal  or  steel  or 
anything  which  is  in  universal  use." 


206  THE    OTHER    SIDE 

c     In  an  article  published  in    the    Saturday 
Corporations  En-  r 

titled  to  Fair         Evening  Post  of  Philadelphia,  ihomas  B. 

Consideration       Reed>  former  Speaker  of  the  United  States 

House  of  Representatives,  presented  many  interesting 

points  concerning  corporations  and  their  operations. 

Among  other  things  he  said: 

"There  is  very  little  in  a  corporation  to  deserve  the 
doubt  and  suspicion  with  which  it  has  been  so  often 
treated,  especially  in  the  harangues  of  those  who  trade 
upon  the  weakness  of  mankind.  Undoubtedly  there 
are  reasons  for  the  feeling  about  corporations,  arising 
from  the  fact  that  corporations  in  their  dealings  with 
mankind  are  less  conciliatory  and  put  themselves 
under  general  rules  more  closely  than  men  who  man- 
age smaller  things  by  the  method  of  a  partnership. 

"It  is  often  said  that  corporations  have  no  souls. 
That  is  true,  but  the  stockholders  have,  and  the  work- 
men also,  and  the  latter  are  just  beginning  to  find  out 
that  profits  are  the  mother  of  wages.  Singularly 
enough,  none  of  the  public  talk  which  has  been  made 
about  corporations  on  account  of  their  having  no  souls 
has  ever  ventured  a  single  sentence  in  favor  of  either 
the  stockholder  or  the  employee,  both  of  whom  un- 
doubtedly have  souls." 

A  H  Ithf  I  Presenting  in  the  columns  of  the  New 
Re-adjustment  of  York  Independent  his  views  of  the  effect 
Labor  of  trusts  on  labor,  John  D.  Archbold,  a  di- 

rector of  the  Standard  Oil  Company,  had  this  to  say 
regarding  one  of  the  operations  of  consolidated  capi- 
tal: 

"Large  aggregations  of  capital  are  made  necessary, 
to  a  great  extent,  by  the  use  of  machinery,  and  one  of 
their  principal  purposes  is  the  adoption  of  the  most 


NOTABLE    INDIVIDUAL    OPINIONS  207 

effective  machinery.  Another  purpose  is  to  obviate 
the  waste  of  competition  in  labor,  as  well  as  in  other 
respects,  so  that  in  many  cases  of  combination  one 
man  will  be  found  to  take  the  place  of  two.  This  is 
more  marked  at  present  in  the  case  of  traveling  sales- 
men, a  considerable  number  of  whom  have  been  dis- 
placed. It  must  be  admitted,  therefore,  that  in  the  use 
of  machinery,  and  also  in  other  ways,  trusts  make  labor 
more  effective  and  require  a  less  number  of  employees 
to  accomplish  a  given  result.  It  follows  that  laborers 
are  temporarily  displaced,  and  the  hasty  conclusion  is 
formed  that  the  general  result  is  the  employment  of 
fewer  laborers. 

"The  general  result  is  quite  the  reverse.  The  effect 
of  the  adoption  of  better  machinery,  more  economical 
methods  and  larger  capital  is  to  improve  and  cheapen 
the  product,  to  increase  consumption  in  markets  where 
the  products  have  alredy  gained  admission,  and  to 
open  new  markets.  Increase  in  demand  for  the  product 
immediately  increases  the  demand  for  labor,  and  it 
follows  as  surely  as  day  follows  night  that  the  number 
of  laborers  eventually  employed  is  increased  instead  of 
being  diminished." 

In  an  article  written  for  Munsev's  Maga- 
Monopoly  of  In- 

dustry  an  Econo-  zine  and  published  after  his  death  in  1899, 
mic  Impossibility  the    late    Governor    Roswell    P.    Flower 

pointed  out  some  of  the  advantages  derived  from 
capital  combinations.  He  said  in  part: 

"The  possibilities  of  economy  in  production  are 
enormous.  Recently  some  wagon  manufacturers  came 
to  New  York  to  organize  for  the  capitalization  of  their 
business.  They  figured  out  a  reduction  of  one-half  of 
their  traveling  salesmen  by  this  combination.  This 


»08  THE    OTHER    SIDE 

and  other  economies  aggregated  nearly  four  hundred 
thousand  dollars,  and  the  net  profits  of  the  concerns 
had  not  amounted  in  the  aggregate  to  more  than  two 
hundred  and  fifty  thousand  dollars  within  a  year.  That 
is  what  capital  combinations  are  doing  for  business. 
They  are  making  it  possible  for  business  to  be  con- 
ducted at  the  lowest  rate  of  expense,  because  the  con- 
cern of  great  capital  is  independent  of  the  banks  and 
can  even  carry  its  own  insurance. 

"Combination  is  increasing  the  wages  of  labor 
while  cheapening  the  cost  of  necessities  as  well  as 
luxuries  to  the  consumer.  And  at  the  same  time  it  is 
establishing  no  monopoly,  because  under  the  economic 
conditions  on  which  it  depends  competition  is  always 
possible  when  the  margin  of  profit  is  more  than  a  small 
fraction  of  the  cost  of  the  article  sold.  There  is  only 
one  form  of  monopoly  possible  in  this  country,  and 
that  is  where  a  patent  controls  the  production  of  a  cer- 
tain article.  That  patent  is  the  reward  of  labor  offered 
by  the  government  and  preserving  to  the  ingenious 
worker,  for  seventeen  years,  the  benefit  of  his  ingenu- 
ity and  toil." 

H   fl't       C       ^n    many    occasions    Henry    O.    Have- 

porations  Hurts     meyer,  president    of   the  American  Sugar 

the  Public  Refining  Company,  has  given  to  the  public 

his  views  relating  to  the  status  and  the  operations  of 

combined  capital.    In  a  paper  that  he  read  before  the 

United  States  Industrial  Commission  at  Washington 

in  July,  1899,  ne  said: 

"Hostility  to  capital  meets  with  its  own  condemna- 
tion. This  is  illustrated  by  the  situation  in  New  York, 
where  a  discrimination  against  capital  has  prevented 
its  employment  and  driven  it  elsewhere,  resulting  in  a 


NOTABLE    INDIVIDUAL    OPINIONS  809 

greatly  increased  tax  rate  and  a  tendency  to  increase 
the  number  of  the  unemployed.  There  is  a  prevailing 
hostility  to  wealth.  This  is  perfectly  illogical.  Every 
one  wants  money.  It  is  the  abuse  of  money,  not  its 
possession,  which  is  opposed  to  public  interests.  This 
hostility  finds  its  outlet  in  hostile  legislation,  in  un- 
equal and  unjust  taxation.  All  this  is  probably  un- 
constitutional. It  is  directly  against  the  interest  of  the 
very  class — I  mean  the  poorer  class — whom  it  is  sup- 
posed to  benefit. 

"Corporations,  whether  directly  such  or  in  the  form 
of  trusts,  are  an  expedient  for  uniting  the  interests  of 
a  large  number  of  persons  of  smaller  means  into  a 
large  aggregation  of  capital.  Attack  upon  them  is, 
therefore,  an  attack  upon  their  stockholders.  In  the 
case  of  many  well-conducted  corporations  these  stock- 
holders are  very  numerous,  and  are  often  persons  of 
moderate  means,  dependent  upon  their  income  for 
their  support. 

"In  the  absence  of  all  disturbing  causes,  the  direct 
tendency  of  a  combination  of  capital  is  to  promote 
economy,  reduce  expenses  and  diminish  prices.  This 
does  not  mean  that  a  person  having  anything  to  sell 
will  not  get  for  it  the  largest  price  that  he  can.  It 
means  that  with  the  abundance  of  capital  ready  for 
investment  which  is  always  found  everywhere,  the  only 
way  to  prevent  competition  is  to  keep  prices  below  the 
competitive  point." 

r  No  speaker  at    the    Chicago    Conference 

Corporations  "    . 

Advantageous  to  made  a  more  distinct  impression  than  the 

the  Community  Honorable  W.  Bourke  Cockran,  former 
member  of  Congress  from  New  York.  As  a  celebrity 
he  attracted  foremost  attention  with  the  Honorable 


ttO  THE    OTHER    SIDE 

William  Jennings  Bryan.  His  address  and  his  utter- 
ances in  debate  revealed  him  as  a  stateman  of  the  high- 
est rank  and  a  profound  economic  student.  He  pre- 
sented some  of  the  advantages  arising  from  corporate 
consolidation  as  follows: 

"The  corporation  is  the  natural  evolution  of  the  part- 
nership. It  is  a  scheme  by  which  many  men,  strangers 
to  each  other,  can  co-operate  in  various  fields  of  indus- 
try with  a  limited  risk  to  each,  while  partnership  is 
essentially  the  co-operation  of  a  few  men  well  known 
to  each  other,  who  are  compelled  to  devote  all  their 
time  and  pledge  all  their  resources  to  the  success  of 
their  joint  enterprise.  A  man  by  holding  stock  in  differ- 
ent corporations  may  participate  in  many  enterprises 
without  risking  all  his  capital  in  any  one,  while  the 
liabilities  and  conditions  of  partnership  are  such  that 
few,  if  any,  men  could  afford  to  be  concerned  in  more 
than  one.  As  every  device  which  facilitates  the  indus- 
trial co-operation  of  men  promotes  the  volume  of  pro- 
duction, corporations  possess  enormous  capacity  for 
swelling  the  tide  of  human  prosperity,  and  they  have 
promoted  the  well-being  of  every  community  in  which 
they  have  been  encouraged,  in  spite  of  the  fact  that  the 
management  of  corporations  has  been  the  blackest 
page  in  all  our  history." 

Labor  Will  Profit    Promment  in  public  life,  State  and  national, 
from  Industrial     for  more  than  a  generation,  the  Honorable 
Combinations       Abram  S.  Hewitt,  former  Mayor  of  New 
York  City  and  former  member  of  Congress,  has  long 
been  recognized  as  an  authority  upon  economic  sub- 
jects, his  knowledge  coming  from  practical  experience 
as  a  large  iron  manufacturer.    His  testimony  is  that: 
"The  organization  of  these  large  industrial  companies 


THE    OTHER    SIDH  til 

shows  the  trend  of  modern  civilization  toward  the  asso- 
ciation of  capital  in  large  bodies  for  the  economical 
production  of  commodities.  The  doctrine  of  associa- 
tion is  steadily  progressing.  Just  how  far  it  will  go  I 
cannot  tell.  How  far  it  will  be  injurious  I  cannot  tell. 
In  some  instances  it  will  be  of  advantage  to  the  public, 
as  in  the  case  of  the  Standard  Oil  Company,  where 
centralized  control  has  greatly  cheapened  the  product. 
The  real  substantial  advantage  of  all  great  industrial 
combinations  goes  to  labor  and  to  the  consumer  of  the 
products.  Every  economy  and  saving  in  cost  of  pro- 
duction benefits  the  wage-earner,  and  just  in  propor- 
tion as  the  cost  of  production  is  decreased  so  will 
the  wages  of  labor  be  increased.  Of  course,  I  am 
speaking  of  competitive  industries  in  this  con- 
nection. In  this  substantial  betterment  of  industrial 
conditions  is  the  true  foundation  of  prosperity." 

,  ,      .    .  Emerson  McMillin.  the  New  York  banker, 
In  the  Interest  of 

Wage-Earners        who  has  become  particularly  well  known 
and  Laborers        from  his  connection    with    many    electric 
lighting  companies,  especially  in  the  West,  says: 

"Combinations  will  decrease  cost  of  production.  It 
will  benefit  society  in  this,  that  it  will  tend  to  do  away 
with  spasmodic  and  extreme  advances  in  prices,  fol- 
lowed by  long  periods  of  depression  and  the  discontent 
of  the  masses  incident  thereto.  The  consumer  and  the 
laborer  should  be  the  chief  beneficiaries.  By  combina- 
tion a  solidity  is  given  to  investments  that  makes  the 
investor  content  with  smaller  net  returns.  In  many 
instances  the  share  capital  issued  is  ridiculously  large. 
The  excess  of  engraved  sheets  of  paper  can  profit  no 
one,  and  it  may  be  a  source  of  danger  to  uninformed 
investors,  and  in  times  of  depression  the  collapse  of 


S12  THE    OTHER    SIDE 

these  excessively  capitalized  companies  will  tend  to 
create  alarm  and  distrust  in  the  financial  system  of  the 
country.  Wages  ought  to  be  higher,  owing  to  absence 
of  ruinous  competition  and  consequent  disposition  of 
employers  to  reduce  expenses.  The  condition  of  the 
wage-earner  should  be  improved.  Regular  employ- 
ment at  fair  wages  is  what  the  wage-earner  desires, 
and  is  essential  to  his  contentment."  - 
Cor  t  C  't  1  Such  an  eminent  authority  on  monetary 
Competes  with  questions  as  George  E.  Roberts,  of  Wash- 
Other  Capital  ington,  Director  of  the  United  States  Mint, 
has  given  his  attention  to  the  influence  of  uninvested 
capital  in  threatening  trusts  and  acting  as  a  restraining 
power  in  any  attempt  that  might  be  made  to  control 
prices.  In  an  article  in  the  Review  of  Reviews  he 
elaborated  this  argument  at  length.  Among  other 
things  he  wrote: 

"To  escape  from  the  pressure  of  these  conditions, 
which  have  been  making  industrial  investments  pre- 
carious and  unprofitable  to  the  majority  of  operators, 
the  latter  have  resorted  to  the  combinations.  If  the 
natural  forces  of  the  business  world  have  a  leveling  in- 
fluence and  have  for  all  time  been  steadily  lifting 
manual  labor  in  importance  as  compared  to  capital, 
why  should  it  be  believed  that  the  latter  can,  by  any 
new  scheme  hatched  in  back  offices,  suddenly  rise  to 
mastery?  Is  it  not  a  little  singular  that  a  movement 
to  which  capital  is  driven  by  distress  should  excite 
such  widespread  fear  that  capital  is  about  to  become 
all-powerful  ?  The  reduction  in  the  earnings  of  capital 
in  the  past  has  come,  we  have  seen,  through  the  in- 
crease in  the  amount  of  capital  seeking  investment  and 
through  the  inventions  which  have  reduced  the  amount 


NOTABLE    INDIVIDUAL    OPINIONS  218 

required  per  unit  of  production.    Will  that  law  cease  to 
operate  in  the  future  ? 

"The  production  of  wealth  is  now  going  on  in  this 
country  at  an  unprecedented  rate.  The  amount  avail- 
able for  investment  is  increasing  rapidly  every  year. 
It  will  persistently  seek  investment,  and  all  attempts 
to  exclude  it  from  employment  by  fencing  up  the  sev- 
eral fields  of  industry  for  quiet  private  possession  by  a 
few  with  extraordinary  returns  for  their  capital  are 
inevitably  doomed  to  failure." 

Improved  Oppor.  On  several  occasions  Charles  W.  Foster, 
tunities  for  former  Governor  of  Ohio,  has  pointed 
Inventive  Genius  QUt  tersdy  and  deady  SQme  of  the  most 

notable  advantages  that  are  the  outgrowth  of  the  trust. 
He  says: 

"The  evolution  in  business  from  the  individual  to  the 
partnership,  and  from  the  partnership  to  the  corpora- 
tion, was  no  more  natural  and  necessary  than  is  the 
evolution  from  the  corporation  to  the  trust.  Let  us 
look  the  situation  squarely  in  the  face.  Denounce  it 
as  we  may,  it  has  come  to  stay.  Why?  Because  the 
gigantic  business  operations  of  the  present  and  future 
cannot  be  carried  on  without  it.  Through  the  trust 
the  enormous  waste  that  is  entailed  upon  business 
operations  by  competition  is  saved;  the  product  and 
the  service  performed  is  cheapened.  Labor  will  have 
better  opportunity  to  enhance  wages  and  to  shorten 
its  hours  of  toil,  as  is  so  signally  illustrated  in  the  rail- 
road service  of  the  country.  Through  the  trust  the 
superior  inventive  genius  of  our  people  (because  of 
universal  education)  will  have  improved  opportunity." 
Students  and  professors  of  political  economy  are  find- 
ing in  the  trust  problem  a  question  that  particularly 
appeals  to  their  minds.  They  are  contributing  much 


214  THE    OTHER    SIDE 

In  the  Struggle  to  a  Seneral  knowledge  of  the  subject  by 
for  the  Trade  of  magazine  articles,  lectures,  and  other  utter- 
the  World  ances  Professor  John  Bates  Clark,  of 

Columbia  University,  has  been  one  of  the  first  to 
recognize  the  utility  of  trusts  in  the  expansion  of 
American  trade.  At  the  Chicago  Conference  he  said: 
"It  is  well  worth  while  to  notice  how  much  will  be 
gained  if  we  can  safely  allow  the  natural  and  central- 
izing tendency  to  go  on.  It  means  the  survival  of  the 
most  productive  forms  of  business.  It  is  first  and 
chiefly  because  they  can  give  more  for  a  dollar  than 
little  establishments  can  give  that  the  great  establish- 
ments supplant  them.  They  out-do  the  small  ones  in 
serving  the  public,  and  this  power  of  superior  service  is 
soon  to  have  a  new  and  unique  field  in  which  to  display 
itself.  We  are  entering  on  an  era  of  world-wide  indus- 
trial connection.  Asia  and  Africa  are  incorporating 
themselves  into  the  economic  organism  of  which 
Europe  and  America  are  the  center.  There  is  coming 
a  neck-and-neck  contest  between  European  countries 
and  the  United  States  for  lucrative  connections  with 
the  outlying  regions.  There  is  also  coming  a  later  and 
grander  contest  between  both  America  and  Europe 
on  the  one  hand,  and  Asia  and  Africa  on  the  other,  for 
the  command  of  the  traffic  of  the  world.  In  this  con- 
test victory  involves  more  than  any  hurried  expres- 
sions of  mine  can  indicate.  It  means  a  leading  position 
in  the  permanent  progress  of  the  world.  It  means 
positive  wealth,  high  wages,  and  intellectual  gains  that 
cannot  be  enjoyed  by  those  who  develop  less  power. 

"In  the  momentous  struggle  that  is  before  us  and 
that  will  yield  to  the  successful  the  greatest  of  mun- 
dane prizes,  I  want  my  country  to  come  uppermost. 


NOTABLE    INDIVIDUAL    OPINIONS  215 

To  that  end  I  wish  it  to  have  every  advantage  that  it 
can  have  in  the  way  of  productive  power.  I  wish  it  to 
be  able  to  meet  the  fiercest  competition,  not  by  accept- 
ing low  pay  for  its  labor,  but  by  creating  the  largest 
possible  product.  Do  you  suppose  that  this  is  pos- 
sible if  it  reverts  to  the  plan  of  multiplying  little  shops, 
with  the  wastes  that  this  system  entails  ?  Mechanical 
invention,  on  the  one  hand,  and  organization,  on  the 
other,  can  save  us  in  the  sharpest  economic  contests." 
Trusts  Will  Ulti-  ^au^  Morton,  third  vice-president  of  the 
mately  Regulate  Atchison,  Topeka  and  Santa  Fe  Railroad, 
Themselves  was  among  those  who  addressed  the  Chi- 
cago Conference.  He  expressed  his  confidence  in  the 
permanence  of  trusts  and  their  ultimate  advantage  to 
the  public.  As  regards  regulation,  he  said: 

"Industrial  combinations  or  trusts  are  very  similar 
to  other  commercial  enterprises.  Some  will  fail,  others 
succeed.  Success  or  failure  depends,  first,  on  whether 
they  are  constructed  on  a  good  foundation,  or  whether 
they  are  built  upon  sand  'and  inflated  with  wind 
and  water.  Second,  whether  they  are  intelligently 
managed  or  not.  In  most  instances,  the  efficient 
men  are  being  retained  by  the  trusts  which  have  been 
recently  formed.  This  augurs  well.  Upon  intelligent 
management  depends  the  question  of  prices  which 
should  be  quite  reasonable  at  all  times.  No  citizen  de- 
nies the  right  of  the  manufacturer  or  producer  to  make 
a  reasonble  profit,  and  it  is  manifestly  best  for  the  wel- 
fare of  the  community  at  large  that  the  nation's  com- 
merce should  make  a  fair  return  to  those  engaged  in  it, 
for  capital,  time,  brains  and  labor  employed.  *  * 
I  believe  that  trusts  will  regulate  themselves.  Any  at- 
tempt to  keep  prices  higher  than  they  ought  to  be  is  a 


216  THE    OTHER    SIDE 

direct  bid  for  competition,  and  capital  always  stands 
ready  for  new  industries  to  manufacture  products 
which  can  be  sold  at  abnormally  high  prices.  Many  of 
those  who  have  tried  it,  say  they  like  nothing  better 
than  to  compete  with  a  combination  that  is  trying  to 
get  unreasonable  profits." 

Concerning  the  futile  attempts  that  have 

not 'check  Trusts  been  made  to  check  the  °Peration  of  organ- 
ized capital  by  legislation,  Professor  John 

Graham  Brooks,  of  the  University  of  Chicago,  has  ex- 
pressed himself  in  these  very  vigorous  terms: 

"I  submit  that  the  time  is  at  hand  for  some  kind  of 
wide,  thorough  and  effective  organization.  Nor  do  I 
believe  it  open  to  doubt,  that  the  immense  pressure  of 
this  necessity  is  producing  the  so-called  trust.  It 
makes  itself  far  more  than  it  is  made.  Men  will  fight  it 
as  they  fought  machinery,  and  with  precisely  the  same 
results.  From  the  United  States  law  of  1890  to  the 
various  attempts  in  different  States  there  is  thus  far  no 
hint  that  these  colossal  forces  toward  new  organic 
forms  can  be  hindered.  They  can  be  made  worse,  as  in 
the  anti-pooling  legislation.  They  cannot  be  stopped. 
I  believe  it  to  be  the  beginning  of  practical  sense  to 
understand  that  the  new  combinations  can  in  no  sense 
be  permanently  smashed.  The  party  which  proposes 
to  do  this,  in  the  sense  of  absolutely  checking  them, 
will  have  plenty  of  leisure  to  regret  it." 
Economic  George  R.  Gaither,  Jr.,  Attorney-Gen- 

Progrcss  Sure  to    eral  of  the   State  of  Maryland,   was  one 
Triumph  of     the    speakers    at    the    Chicago    Con- 

ference who  emphasized  the  view  that  the  popular  out- 
cry against  trusts  was  useless  and  unnecessary.  He 
said: 


NOTABLE    INDIVIDUAL    OPINIONS  21T 

"It  is  only  when  a  consolidation  of  the  great  busi- 
nesses which  deal  in  the  necessities  of  life,  and  with  the 
callings  in  which  we  are  vitally  interested,  threaten  us 
with  a  great  economic  revolution,  that  the  country  be- 
comes aware  of  the  dangers  which  are  threatening.  In 
the  first  paroxysm  of  fear  the  cry  is  raised  that  this  ten- 
dency of  modern  business  life  must  be  checked,  that 
these  combinations  must  be  destroyed,  and  men  must 
be  forced  by  legislation  to  return  to  the  business 
methods  and  ways  which  their  intelligence  has  dis- 
carded. 

"As  well  might  we  attempt  to  turn  back  the  forces 
of  nature  as  the  forces  of  economic  social  conditions. 
It  would  be  as  resonable  to  endeavor  by  legislation  to 
restore  the  days  of  the  stage-coach,  or  to  prohibit  elec- 
tricity from  usurping  the  sphere  of  steam.  The  at- 
tempt of  ignorant  bigotry  to  compel  Galileo  to  recant 
his  masterly  exposition  did  not  prevent  the  earth  from 
revolving  about  the  sun.  The  truth  is  rapidly  dawning 
upon  humanity  that  co-operation  is  the  highest  form 
of  industrial  activity  that  civilization  can  develop. 
When  this  great  economic  axiom  is  being  accepted  by 
the  capitalists  of  our  nation,  it  is  imperative  that  the 
great  working  masses  should  not  blindly  oppose  its 
adoption." 

f.  At    the    Chicago    Conference    on    Trusts, 

Corporations 

Subject  to  Laws  J.  Sterling  Morton,  of  Nebraska,  Secretary 
of  Competition     of  Agriculture  in  the  Cabinet  of  President 
Cleveland,  took  the  strongest  grounds  against  the  mis- 
apprehension that  there  is  danger  of  permanent  mon- 
opoly in  combinations  of  capital.    Upon  that  point  he 
expressed  himself  in  part  as  follows: 
"There  is  much  misapprehension  as  to  incorporated 


218  THE    OTHER    SIDE   ' 

capital  in  the  United  States.  Oratorical  vagarists  have 
endeavored  to  make  common  people  believe  that  in- 
corporations are  not  subject  to  economic  laws  of  com- 
petition and  that  the  relation  of  supply  to  demand  is 
not  the  sole  regulator  of  values.  The  fact,  however, 
remains  that  money  invested  in  manufactories  or  in 
railroads  belonging  to  incorporations  is  no  stronger, 
no  better  and  no  more  exempt  from  the  operation  of 
commercial  laws  than  the  money  which  is  owned  by 
individuals.  There  need  be,  in  my  judgment,  no  appre- 
hension as  to  the  trusts  crushing  out  all  competition. 

"With  the  exception  of  the  oil  trust  and  the  sugar 
trust,  failure  among  trusts  has  been  universal.  The 
whisky  trust,  the  tobacco  trust  and  all  the  other  trusts 
of  any  importance  up  to  date,  except  those  that  have 
been  formed  very  recently,  have  been  complete  failures. 
These  failures  have  come,  firstly,  from  over-capitaliza- 
tion ;  and,  secondly,  from  mismanagement.  Intelligent 
competition  can  enter  the  field  against  any  trust  on 
earth  except  one  which  has  a  natural  monopoly  (by  this 
I  mean  one  which,  like  the  Standard  Oil  Company, 
owns  the  only  oil-producing  lands  in  the  country),  and 
successfully  put  its  products  upon  the  market  with 
the  sympathy  of  the  consumer  all  on  its  side.  By  this 
I  mean  that  outside  of  the  trusts  co-partnerships  and 
stock  companies  may  be  formed  with  capital,  energy 
and  ability  to  successfully  take  the  market  against  any 
and  all  trusts'  products,  except  those  which  are  the 
result  of  a  natural  monopoly." 

Legitimate  Com.   Amon^    lai"^e    employers    of    labor,  Clem 
binations  Cannot  Studebaker,  the  carriage   manufacturer   of 
be  Restrained       Great  Bend>  Ind  ?  has  a  reputation  for  busi- 
ness enterprise  that  extends  throughout  the  United 


NOTABLE    INDIVIDUAL    OPINIONS  819 

States.  His  belief  in  the  harmlessness  of  trusts  was 
expressed  in  a  speech  at  the  Chicago  Conference,  from 
which  the  following  extract  is  taken: 

"No  true  monopoly  is  possible  in  this  country  except 
that  enjoyed  by  virtue  of  a  patent  granted  by  the 
United  States.  If  those  who  undertake  to  inaugurate 
trusts  had  a  monopoly  of  the  trust  business  there  would 
be  cause  for  alarm.  But  any  one  can  go  into  the  trust 
or  combination  business  who  is  able  to  find  others  who 
will  join  him.  Herein  is  the  safety  of  society.  Com- 
binations of  capital  build  railroads  and  decrease  the 
cost  of  travel  and  transportation.  Some  part  of  that 
saving  they  keep  as  profit,  but  whenever  they  under- 
take to  keep  so  much  of  it  from  the  public  as  to  give 
them  unusually  large  returns  on  their  capital,  a  rival 
springs  up,  and  down  goes  the  cost  to  consumers. 
Large  Profits  "Trusts  have  undertaken  to  enfold  pro- 
Challenge  ducers  so  as  to  limit  competition,  but  in 
Competition  vain  No  sooner  have  they  gathered  into 

the  fold  all  in  sight  than  up  springs  another.  And  this 
will  continue  to  be  the  case  so  long  as  there  are  profits 
made  which  allure  outside  capital,  and  outside  capital 
is  left  free  to  take  a  hand  in.  Sugar  refining,  the  manu- 
facture of  tobacco,  etc.,  are  cases  in  point.  Whenever 
these  great  companies  give  evidence  of  making  large 
profits,  some  powerful  rival  comes  into  the  field,  and 
competition  proceeds  to  regulate  prices  on  a  lower 
plane. 

"Combination  within  reasonable  lines  is  likely  to  be 
of  benefit.  This  is  already  evident  in  the  fact  that  our 
products  in  iron  and  steel  are  coming  into  large  de- 
mand throughout  the  world,  even  in  England  herself. 
The  best  service  which  our  legislators  can  render  the 


280  THE    OTHER    SIDE 

country,  when  considering  the  subject  of  our  produc- 
tive agencies,  is  to  insure  enterprise  and  home  capital 
a  fair  field  and  no  favor.  It  is  folly  to  talk  of  restrain- 
ing legitimate  combinations.  There  is  scarce  a  corner 
grocery  in  the  land  that  is  not  witness  to  a  combina- 
tion of  money  and  brains,  a  combination  for  the  mutual 
benefit  of  the  combined.  The  whole  country  is  built 
up  of  combinations.  They  exist  alike  in  society,  in 
government  and  in  business,  and  it  is  as  futile  and 
senseless  to  talk  about  restrictions  in  this  particular  as 
it  would  be  to  undertake  to  make  Niagara  flow  up 
stream  into  Lake  Erie." 

w    .    -  Thomas     Updegraff,     former      Congress- 

Warning  to  Free    man    from    Iowa,    holds    that    trusts    are 
Traders  jn   no   sense   incompatible  \vith   the   pro- 

tective tariff.  On  this  subject  he  has  expressed  himself 
in  these  terms: 

"That  great  aggregations  of  capital  have  wrought 
incalculable  public  good  is  not  denied.  A  monopolistic 
trust  I  stand  against;  an  aggregation  of  capital,  how- 
ever large,  properly  managed,  I  approve.  It  is  only  a 
fool  who  kills  the  goose  that  lays  daily  the  golden  egg. 
We  will  not  give  up  the  tariff;  if  it  be  in  any  sense  the 
mother  of  trusts,  we  will  save  the  mother  and  raise 
her  children  in  the  nurture  and  admonition  of  the  Lord. 
Did  any  one  ever  see  rich  and  fertile  lands  without 
weeds?  What  do  sensible  people  who  have  rich  and 
fertile  soil  do?  Do  they  abandon  it  because  of  the 
weeds  and  go  to  raising  grain  among  the  rocks  of 
New  "England  ?  Do  they  not  rather  kill  the  weeds  and 
save  the  soil  ?  It  has  been  said  there  never  was  a  para- 
dise without  snakes.  Protectionists  would  kill  the 
snakes  and  save  the  paradise.  Free  traders  in  America 
would  devastate  the  paradise  and  save  the  snakes." 


NOTABLE    INDIVIDUAL    OPINIONS  281 

Conditions  Ad-     At  the  Chicago  Conference,  Samuel  Adams 

mestVcompeti.    Robinson,    of    the    American    Protective 

tion  League,  was  one  of  those  who  took  strong 

grounds  in  favor  of  the  tariff  as  a  means  of  industrial 

protection  even  under  trust  conditions.    He  said: 

"Let  us  suppose  a  condition.  In  the  event  of  the 
consolidation  of  all  industries  into  trusts,  with  the  pro- 
tective tariff  forever  removed,  and  with  its  removal  all 
incentive  to  new  competitive  enterprises  wholly  lack- 
ing, does  any  one  suppose  that  the  trusts  would  dis- 
solve and  their  constituent  companies  return  to  unre- 
stricted competition  and  price  cutting  among  them- 
selves ?  Would  they  surrender  to  foreign  competition 
and  go  out  of  business  entirely  ?  No  sane  person  could 
for  a  moment  anticipate  any  of  these  results.  On  the 
contrary,  the  assured  prospect  of  a  permanent  removal 
of  protective  tariff  would  impel  every  industrial  enter- 
prise in  this  country  now  operating  independently  to 
rush  for  shelter  into  a  trust  organization.  Domestic 
competition  would  be  at  an  end.  What  of  foreign 
competition?  The  answer  is  plain.  On  a  free-trade 
basis,  and  with  the  certainty  that  no  new  domestic 
competition  could  arise  and  complicate  matters,  our 
industrial  captains,  being  absolute  masters  of  the  situ- 
ation, would  not  surrender  the  home  market  to  foreign- 
ers, but  would  make  a  tremendous  fight  for  the  preser- 
vation of  their  existence.  They  would  fight  inside  the 
limits  of  a  very  small  ring — the  ring  of  reduced  prices 
and  reduced  wages.  Prices  and  wages  must  come 
down  to  approximately  the  European  standard,  to  say 
nothing  of  the  Asiatic  standard." 

William  Fortune,  president  of  the  Indiana  State 
Board  of  Commerce,  has  in  a  public  address  given  it 
as  his  opinion  that  much  harm  is  quite  sure  to  result 


228  THE    OTHER    SIDE 

from  hasty,  ill-considered  attempts  to  interfere  with 
the  natural  movement  of  economic  forces  as  exhibited 
in  the  present  centralization  of  capital.  He  says: 

Injury  May  Result  "We  know  that  economic  progress  has 
from  Revolution-  ever  been  pitiless  in  its  sacrifices,  and 
ary  Measures  that  in  its  conflict  wjth  human  indus- 
try its  advance  cannot  long  be  hindered.  This 
humanitarian  cry  against  the  individual  hardships 
of  trusts,  however  distressing  it  may  be  and  however 
much  it  may  appeal  to  sympathy,  will  not  be  more 
effectual  than  has  been  the  outcry  for  the  same  reason 
against  labor-saving  machinery  and  methods.  It 
is  not  clear  that  the  power  of  regulation  can  be 
effectively  exercised  in  any  other  way  than  by  the 
application  of  fundamental  moral  principles  for  the 
protection  of  rights  of  men  and  in  the  interest 
of  public  policy. 

"Economic  operation  is  in  itself  an  inexorable  law. 
Theories  of  revolutionary  effect  may  be  helpful  indica- 
tions of  what  may  ultimately  come,  but  in  wise  pro- 
cedure the  first  steps  should  be  in  the  direction  of  ex- 
perimental test  of  powers  that  have  served  us  well  in 
the  past.  More  radical  measures  will  come  if  neces- 
sary, but,  in  the  light  of  present  knowledge,  can  any 
careful  thinker  say  that  this  problem,  now  in  its  evo- 
lutionary stages,  can  best  be  solved  by  revolutionary 
measures?  Is  it  not  better  to  patiently  seek  to  apply 
practicable  thought  to  the  correction  of  natural  ten- 
dencies? If  radical  measures  should  become  neces- 
sary their  success  will  be  hastened  by  preceding  failure 
in  reasonable  efforts,  as  history  proves  in  the  instances 
of  great  changes  brought  about  in  the  past.  A  wise 
radical  is  first  a  patient  conservative." 


NOTABLE    INDIVIDUAL    OPINIONS  228 

A  Ubor-Saving  Professor  George  Gunton  is  a  well  known 
and  Price-Reduc-  authority  upon  social  and  political  econ- 
Ing  Device  omics>  Re  ig  the  author  Q{  Wealth  and 

Progress  and  The  Principles  of  Social  Economics, 
editor  of  Gunton's  Magazine,  and  president  of  the 
Institute  of  Social  Economics.  Upon  the  lecture  plat- 
form, in  the  columns  of  his  magazine,  and  as  a  con- 
tributor to  newspapers  and  periodicals,  he  has  had 
much  to  say  concerning  the  centralization  of  capital. 
His  attitude  toward  trusts  is  made  clear  in  the  follow- 
ing extract  from  an  article  from  his  pen,  published  in 
the  Social  Economist: 

"Trusts,  instead  of  being  sudden  monopolistic  crea- 
tions that  have  been  sprung  on  the  community  by  a 
ftw  designing  conspirators,  are  but  the  last  link  in  an 
industrial  chain  more  than  a  century  long;  they  are 
no  more  revolutionary  than  any  one  of  the  previous 
links,  and  less  so  than  some  of  the  earlier  ones.  Each 
one  of  these  links  in  the  great  chain  of  industrial  evo- 
lution came  and  stayed  only  because  it  was  more 
profitable  than  its  predecessors  to  those  who  employed 
it,  lessened  the  cost  of  production  and  served  the  com- 
munity more  cheaply.  Had  it  not  done  this,  it  could 
not  have  sustained  itself  in  competition  with  the  old 
methods. 

"That  the  concentration  of  capital  is  necessary  to  the 
employment  of  the  best  methods  in  modern  industry 
it  too  obvious  to  need  discussion.  Those  who  contro- 
vert this  position  may  be  passed  by  as  unqualified 
scientifically  to  discuss  the  subject.  Every  labor-sav- 
ing and  price-reducing  improvement  now  in  use  has 
involved  concentration  of  capital  in  some  form;  in 
fact  the  history  of  the  economic  progress  of  the  present 


824  THE    OTHER    SIDE 

century  is  the  history  of  the  concentration  of  produc- 
tive capital.  To  decentralize  capital  is  to  barbarize 
society.  The  general  proposition  of  the  economic 
necessity  of  the  centralization  of  capital,  therefore, 
may  be  regarded  as  self-evident." 

.  Touching  the  fear  that  the  public  has  had 
Lower  Prices  and 

Higher  Wages  lest  the  trusts  should  be  able  to  advance  and 
Results  of  Trusts  maintain  prices  and  to  reduce  the  wages  of 
workingmen,  David  Ross,  secretary  of  the  Illinois 
Bureau  of  Labor  Statistics,  told  those  who  listened  to 
him  speaking  from  the  platform  of  the  Civic  Federa- 
tion of  Chicago: 

"When  the  great  railroads  organized  years  ago  the 
apprehension  prevailed  that  rates  would  be  advanced, 
and  the  calamity  prophets  of  that  day,  like  the  present, 
were  painfully  realistic  in  describing  the  fate  that  was 
to  destroy  us.  Transportation  charges  for  freight  are 
less  by  two-thirds  now  than  they  were  prior  to  the 
organization,  with  a  corresponding  improvement  in  the 
service.  The  independent  refiners  of  petroleum  will 
unite  in  declaring  the  Standard  Oil  Company  a  mon- 
opoly, and  yet  it  cannot  be  disputed  that  it  was  power- 
less to  maintain  prices.  The  reports  show  that  the 
wholesale  export  price  of  oil  has  declined  from  twenty- 
five  cents  per  gallon  in  1871,  to  less  than  six  cents  in 
1899.  The  people  are  getting  a  better  article  for  nearly 
one-fifth  the  former  cost;  changes  in  the  process  of  re- 
fining have  saved  the  people  millions  of  dollars,  with- 
out, it  is  fair  to  presume,  impairing  the  profits  of  the 
company. 

"The  oil  and  railroad  interests  of  the  country  have 
been  singularly  free  from  labor  disturbances.  As  a 
matter  of  recent  history,  our  most  serious  conflicts 


NOTABLE    INDIVIDUAL    OPINIONS  225 

have  been  with  interests  that  neglected  to  federate. 
Labor  leaders  will  agree  that  better  terms  of  employ- 
ment can,  as  a  rule,  be  obtained  from  large  than  from 
small  employers.  Why,  then,  should  we  fear  the  re- 
sults of  consolidation?  It  is  the  part  of  reason  to 
encourage  a  tendency  that  will  make  possible  higher 
wages,  lower  prices,  and  less  hours  of  labor.  Work- 
ingmen  who  will  be  expected  to  join  the  crusade 
aginst  so-called  trusts  should  have  a  care  lest  they  be- 
come the  victims  of  designing  demagogues  who  would 
invoke  the  law  to  punish  those  who  favor  the  restric- 
tions which  labor  unions  impose." 

Trusts  Have  ^  ^as  ^een  Pomted  out  by  many  writers 
Already  Become  and  speakers  that  the  large  corporations  in 
International  the  most  important  branches  of  industry 

have  become  more  than  local  or  national  in  their  scope 
and  influence.  Their  field  of  operations  is  now  world- 
wide. Referring  particularly  to  this  fact  Henry  W. 
Blair,  former  United  States  Senator  from  New  Hamp- 
shire, said  at  the  Chicago  Conference: 

"It  is  frequently  observed  that  the  trusts  are  a  natu- 
ral development  of  the  protective  tariff,  and  the  strong 
prejudice  against  the  evils  which  appear  to  be  flowing 
from  them  is  used  as  an  argument  against  the  pro- 
tective system.  That  is  to  say,  the  existence  of  the 
trust  is  an  argument  for  free  trade.  The  ordinary  and 
perhaps  sufficient  reply  to  this  assertion  is  the  fact  that 
the  trust  exists  in  free-trade  countries  as  well  as  in  our 
own.  This  fact  is  in  itself  conclusive  that  the  trust 
does  not  originate  in  protection.  It  must  be  remem- 
bered that  trusts  are  international  already,  and  if  un- 
restrained the  tendency  of  capital  to  combine  will  be- 
come world-wide." 


828  THE    OTHER    SIDE 

.....    .         The  fact  that  trusts  are  corporations,  pure 

Feared  from  Large  and  simple,  and  that  condemnation  of  them 
Corporations  js  iOgicaiiy  condemnation  of  the  entire  cor- 
poration method  of  doing  business,  is  fully  recog- 
nized by  most  people  nowadays.  W.  W.  Potter,  a 
member  of  the  Pennsylvania  bar,  has  voiced  this  view 
of  the  case  as  follows: 

"As  a  matter  of  fact,  most  of  the  business  combina- 
tions of  the  day  are  not  trusts  at  all.  They  are  simply 
large  corporations.  The  so-called  anti-trust  attacks 
are  not  really  attacks  upon  trusts,  for  the  reason  that 
but  very  few  real  trusts  are  in  existence  in  this  coun- 
try. The  hue  and  cry  that  has  been  raised  is  really  an 
attack  upon  large  corporations.  If  the  people  of  this 
country  are  determined  to  wipe  out  all  corporations, 
of  course  they  can  do  so.  No  one  would  claim,  how- 
ever, that  such  an  extreme  measure  is  desired  by  any 
one  who  has  the  prosperity  of  the  country  at  heart. 
Such  action  would  be  to  turn  backward  the  hands  upon 
the  dial  of  human  progress,  and  ninety  per  cent,  of  the 
country's  industries  would  stop.  To  the  community 
as  a  whole,  large  corporations  are  neither  injurious 
nor  dangerous.  On  the  contrary,  the  economies 
effected  by  the  concentration  and  combination  of  capi- 
tal and  its  direction  by  competent  management  means 
always  the  cheapening  of  commodities  to  the  public." 
Central!  ation  ^e  impossibility  of  overcoming  by  legisla- 
Principle  Cannot  tive  enactment  or  by  any  other  means  the 
be  Destroyed  movement  toward  the  union  of  capital  has 
been  expressed  in  these  words  by  William  Dudley 
Foulke,  the  well-known  publicist  of  Indiana: 

"The    numerous    laws    which    have    already    been 
enacted     to  break  up  trade    agreements,  pools,  and 


NOTABLE    INDIVIDUAL   OPINIONS  827 

technical  trusts,  have  been  ineffective.  They  have  re- 
sulted in  the  organization  of  larger  corporations  which 
are  more  permanent  and  more  dangerous  in  their  char- 
acter than  the  things  which  are  prohibited  by  statute. 
If  it  were  possible  to  breakup  these  corporations,  which 
may  well  be  doubted,  the  men  who  compose  them 
would  unite  perhaps  in  partnerships  or  other  forms  of 
union  to  accomplish  the  same  objects.  If  you  break  up 
these  there  are  infinite  varieties  of  organization  which 
will  take  their  place.  The  tendency  of  men  to  associate 
for  the  accomplishment  of  a  common  purpose  is  like 
the  law  of  gravitation,  and  no  statute  will  be  found 
effective  against  such  a  tendency." 

An  Outgrowth  of  Recent  contributions  by  the  legal  fraternity 
Advancing  to  the  discussion  of  combinations  of  capi- 

Civihzation  taj?  fa^  uses  ancj  abuses>  have  been  abun- 
dant and  often  of  notable  character.  Many  lawyers 
appeared  at  the  Chicago  Conference  and  presented 
suggestive  ideas.  Among  them  was  A.  Leo  Weil,  a 
member  of  the  Pennsylvania  bar,  who,  besides  other 
things,  said: 

"Legislative  restrictions  upon  trade  have  always 
proved  baneful,  and,  in  most  cases,  have  only  aggra- 
vated the  evils  they  sought  to  prevent.  Consolidations, 
understood  as  the  amalgamation  of  a  number  of  in- 
dustrial plants,  do  not  prevent  that  kind  of  competition 
which  is  beneficial  to  the  public,  and  do  not  create 
monopolies.  Consolidation,  instead  of  being  an  injury, 
is  a  benefit  to  labor.  Large  capitalization  is  a  relative 
term,  and  considered  with  reference  to  the  present 
trade  conditions,  the  capital  employed  is  not  larger 
than  is  necessary  successfully  to  carry  on  such  enter- 
prises. Consolidations  are  the  outgrowth  and  the 


288  THE    OTHER    SIDE 

symptom  of  the  advancing  civilization  of  to-day,  and 
the  inevitable  tendency  of  its  complex  trade  condi- 
tions." 

Conspicuous  among  those  who  have  had 
1  Captains  practical  experience  in  important  business 

affairs  is  Charles  R.  Flint  of  New  York. 
Mr.  Flint  is  well  known  from  his  connection  with 
South  American  shipping  and  trading  interests,  and 
with  banking  affairs  in  New  York,  and  has  had  an 
active  part  in  the  organization  and  development  of  sev- 
eral of  the  largest  contemporaneous  industrial  enter- 
prises. In  an  article  on  The  Benefits  of  Business  Com- 
bination, published  in  the  Saturday  Evening  Post,  of 
Philadelphia,  he  had  this  to  say  concerning  one  of  the 
underlying  elements  of  success  in  industrial  consolida- 
tions : 

"Just  so  is  there  danger  of  ruin  if  the  organization 
and  management  of  industrial  corporations  are  given 
into  unskillful  and  inexperienced  hands.  One  great 
danger  lies  in  jeopardizing  at  the  outset  what  is  gener- 
ally the  most  valuable  asset  of  an  industrial  consoli- 
dation, namely,  the  good-will  of  the  successful  com- 
panies which  are  included  in  the  consolidation.  By 
years  of  business  integrity  each  company  brought  into 
a  combination  has  established  relations  of  confidence 
with  its  customers,  and  the  latter  are  usually  very  well 
satisfied  with  both  the  company's  products  and  its 
methods.  The  danger  comes  when,  upon  the  comple- 
tion of  the  consolidation,  some  enthusiastic  member  of 
the  newly  formed  executive  committee,  carried  away 
by  the  theories  of  centralization  and  believing  himself 
to  be  a  Napoleon  of  industry,  attempts  to  centralize 
the  business  too  rapidly  and  too  dictatorially,  sweeping 


NOTABLE    INDIVIDUAL    OPINIONS  289 

out  of  existence  stable  and  profitable  properties, 
thereby  injuring  the  general  good-will  and  endanger- 
ing the  whole  combination.  In  cases  of  this  kind, 
however,  the  rare  common-sense  of  the  clear-headed 
and  practical  men  who  have  built  up  individual 
industries  comes  into  play  and  to  the  rescue.  Exper- 
ience has  shown  that  the  greatest  care  must  be 
exercised  in  organizing  new  consolidations  to  retain 
the  services  of  such  men;  they  are  the  real  captains  of 
industry.  In  several  industrial  consolidations  in  the 
organization  of  which  I  have  been  recently  associated 
I  have  urged  at  the  beginning  that  the  individuality 
and  independence  of  the  successful  concerns  shall  be 
sustained,  and  that  the  standard  of  all  shall  be  brought 
up  to  that  of  the  best,  and  not  to  centralize  business  in 
such  a  way  as  to  destroy  the  good-will.  That  way  lies 
discord,  and  in  discord  lurks  failure." 


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